Users of financial statements and the accounting profession are lobbying Capitol Hill once again to keep its political nose out of accounting rulebooks.

Seven professional groups sent an appeal to leaders of the U.S. Senate and its Banking Committee to state their objections to an amendment to the Restoring American Financial Stability Act that is weaving its way through Congress. The groups are particularly concerned about an amendment proposed by Sen. Sherrod Brown of Ohio intended to better illuminate debt, especially any debt that’s managed to escape the balance sheet.

Brown’s office would not comment on the amendment directly, but the amendment reads like a wish list that might arise from the shock and awe over accounting maneuvers described in the Lehman Brothers’ bankruptcy report. It would require companies to submit reports to the Securities and Exchange Commission that would make some disclosures and assertions regarding assets and liabilities in corporate balance sheets.

Through the proposed report, companies would attest that the recorded amounts of assets and liabilities reflect “a reasonable assessment by the issuer of the most likely outcomes” for the assets and liabilities. It also would call on issuers to record any financing of assets for which the issuer has “more than minimal economic risks or rewards.”

The letter to senators is signed by the Center for Audit Quality, American Institute of Certified Public Accountants, CFA Institute, Council of Institutional Investors, Financial Executives International, U.S. Chamber of Commerc, and the Investment Company Institute. The groups take exception not with the nature of the amendment, but with the intent in Congress to pursue it through legislation.

Investors relying on financial statements to make investment decisions should have faith that the rules companies follow to complete those statements are free of politics, the groups assert. “We believe political influences that dictate one particular outcome for an accounting standard without the benefit of a public due process that considers the views of investors and other stakeholders would have adverse impacts on investor confidence and the quality of financial reporting, which are of critical importance to the successful operation of the U.S. capital markets,” they wrote.

James C. Allen, a head of capital markets policy for the CFA Institute, told Compliance Week the Institute supports greater disclosure, but accounting rules should come from the Financial Accounting Standards Board not Congress. “We’ve been strong supporters of making sure all these issues are brought on balance sheets,” he said. “But having Congress dictate to FASB what they should be doing—that’s a bit disconcerting.”

Topics