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Mr. CONAWAY. Mr. Chair, I rise today to express my support for the efforts my colleagues have made this week to improve the regulatory environment for growing small businesses across our nation. This is important work that should continue without delay.
As we move forward though, there is a policy I am opposed to in the underlying bill that I hope can be addressed either in the Senate or in Conference. Specifically, I am concerned that in this legislation, Congress sets a perilous precedent by establishing an accounting standard through legislation. While I am not opposed to this bill today, in part because I appreciate the work that has already been done to address this issue, there is still more to do to fully correct the problem I see.
As a CPA and the former Chairman of the National Association of State Boards of Accountancy, I am concerned about the encroachment this bill makes on the independence of the Financial Accounting Standards Board or FASB. FASB is an independent, private sector organization which establishes the standards of fmancial accounting that govern the preparation of financial reports by nongovernmental entities.
The law has long recognized the need for an independent body, unencumbered by political or business affiliations, to arbitrate the complex accounting questions that arise in our modern economy. FASB functions as a rule maker that sits above the fray, so that public companies, investors, analysts, and government officials can all rely on the integrity and accuracy of fmancial statements. FASB's independence from businesses and governments alike is central to their ability to balance the competing interests of all stakeholders and generate standards that everyone can have confidence in.
Today's bill, H.R. 3606, takes a dangerous step away from this autonomy and towards a FASB that is held captive by the political and parochial interests of Congress. This legislation will interpose the views of Congress between FASB and the individuals and companies who rely on FASB's independence and judgment.
While I am strongly in favor of lifting regulatory burdens on our nations businesses, small and large alike, Congress should not direct when particular accounting standards are applicable to emerging growth companies. Replacing the careful, inclusive, and deliberative judgments of FASB with the inexpert opinions of Congress could result in a standard that does not meet the competing needs of all market participants. Investors and analysts rely on the information in financial reports to fairly evaluate the firms they seek to invest in; FASB is the appropriate body to balance their need for information against the concerns of small business owners with the cost of complying with reporting requirements.
I am encouraged that the Chairman, Ranking Member, and sponsor of this legislation have already met with representatives from accounting profession and made good faith efforts to address my concerns. However, there is still work to be done to improve this bill. I hope that as similar legislation is considered in the Senate and if the two houses meet in a conference committee, my colleagues will take a close look at the consequences of this policy and take another step back from this slippery slope.
While many might argue that Congress ought to be able to set accounting standards, accountants are universally opposed to this idea. For those of us who spend our lives dealing with Congress's handiwork in the tax code, we see a grim glimpse of the future if Congress were to stand in for the independent accounting standards bodies. As I often tell my constituents, if you like the tax code, you will love financial statements when Congress writes the accounting rules.
The value of good and effective accounting standards cannot be overstated; they are the yardstick of the marketplace. Good standards are essential to a well functioning economy because they provide a consistent framework for the meaningful evaluation of widely disparate entities. Without them, it is impossible to hold an accurate understanding of the fmancial position of a firm, an industry, or the wider economy.
Almost 80 years ago, Congress had the wisdom to establish an independent body to develop those standards so that accounting was never influenced by politics. Today, as more Americans than ever are active participants in financial markets, the need for a trusted, independent arbiter of public accounting standards has never been more important.
I look forward to working with my colleagues to improve this legislation and to further strengthen the independent process for writing financial accounting standards in the future.