I

106TH CONGRESS

2D SESSION H. R. 5365

To impose a temporary moratorium on the elimination of the existing ‘‘pooling

of interests’’ method of accounting for business mergers and acquisitions,

and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 3, 2000

Mr. COX (for himself, Mr. BLILEY, Mr. TAUZIN, Mr. DREIER, Mr. DAVIS of

Virginia, Mr. GOODLATTE, Mr. WELLER, Mr. DOOLEY of California, Ms.

ESHOO, Mr. MORAN of Virginia, Mr. SMITH of Washington, Mr. CROWLEY, and Mr. GONZALEZ) introduced the following bill; which was referred to the Committee on Commerce

A BILL

To impose a temporary moratorium on the elimination of

the existing ‘‘pooling of interests’’ method of accounting

for business mergers and acquisitions, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Financial Accounting

5 for Intangibles Reexamination (FAIR) Act’’.
2

•HR 5365 IH

1 SEC. 2. SENSE OF CONGRESS.

2 It is the sense of the Congress that, prior to changing

3 existing rules of accounting for business combinations and

4 intangible assets, the Securities and Exchange Commis5 sion and the Financial Accounting Standards Board

6 should undertake a comprehensive reexamination of the

7 appropriate methods of accounting for purchased and in8 ternally generated intangibles including goodwill, and

9 should await the results of related studies of these issues.

10 SEC. 3. MORATORIUM ON ELIMINATION OF POOLING OF IN11 TERESTS METHOD OF ACCOUNTING.

12 (a) CONTINUED VALIDITY OF METHOD.—Notwith13 standing any other provision of law, for purposes of any

14 financial statement, report, or other document required

15 under any of the securities laws, the availability and use

16 of the pooling of interests method of accounting for any

17 business combination shall be determined in accordance

18 with generally accepted accounting principles as in effect

19 on October 1, 2000 .

20 (b) DURATION OF MORATORIUM.—This section shall

21 take effect upon the date of the enactment of this Act and

22 shall remain in effect until 90 days after the date of the

23 submission of the report required by section 4(e).

24 SEC. 4. FURTHER STUDY.

25 (a) ESTABLISHMENT.—There is established a com26 mission to be known as the Commission on Financial Ac-
3

•HR 5365 IH

1 counting for Intangibles (referred to in this section as the

2 ‘‘Commission’’).

3 (b) DUTIES.—The Commission shall—

4 (1) consider the general usefulness of financial

5 statements prepared under generally accepted ac6 counting principles in light of recent trends in the

7 securities markets;

8 (2) consider the impact that shortcomings in

9 generally accepted accounting principles have on se10 curities market volatility, capital allocation, and the

11 investment of retirement fund assets, both individual

12 and institutional;

13 (3) consider methods to better identify, value,

14 and account for purchased and internally generated

15 intangible assets;

16 (4) examine the general questions surrounding

17 the role of intangible assets in financial reporting in

18 the economy; and

19 (5) consider the economic impact that would re20 sult if the pooling of interests method of accounting

21 for business combinations were eliminated.

22 (c) MEMBERSHIP.—

23 (1) NUMBER AND APPOINTMENT.—

24 (A) The Commission shall be composed of

25 10 individuals, of which—
4

•HR 5365 IH

1 (i) 3 shall be appointed by the major2 ity leader of the Senate;

3 (ii) 2 shall be appointed by the minor4 ity leader of the Senate;

5 (iii) 3 shall be appointed by the

6 Speaker of the House of Representatives;

7 and

8 (iv) 2 shall be appointed by the minor9 ity leader of the House of Representatives.

10 (B) From the 10 commissioners appointed,

11 a chairman shall be selected jointly by the ma12 jority leader of the Senate and the Speaker of

13 the House of Representatives.

14 (2) QUALIFICATIONS FOR MEMBERSHIP.—

15 (A) Of the members appointed under para16 graph (1)(A), 4 shall come from the accounting

17 profession.

18 (B) The remainder of such members shall

19 be experts capable of carrying out the duties

20 described in this section.

21 (3) DEADLINE FOR APPOINTMENT.—All mem22 bers of the Commission shall be appointed by no

23 later than December 31, 2000.
5

•HR 5365 IH

1 (4) TERMS OF APPOINTMENT.—The term of an

2 appointment to the Commission shall be for the life

3 of the Commission.

4 (5) VACANCY.—

5 (A) A vacancy on the Commission shall be

6 filled, not more than 30 days after notice of the

7 vacancy is given to the Commission, in the

8 same manner in which the original members

9 were selected.

10 (B) A vacancy shall not affect the power of

11 the remaining members to execute the duties of

12 the Commission.

13 (d) PROCEDURE.—

14 (1) MEETINGS.—The Commission shall meet at

15 the call of its chairman or a majority of its mem16 bers.

17 (2) QUORUM.—A quorum shall consist of 7

18 members of the Commission.

19 (e) REPORT.—Not later than 9 months after the date

20 of the enactment of this Act, the Commission shall submit

21 a report to the President and Congress which shall contain

22 a detailed statement of the Commission’s recommenda23 tions, findings, and conclusions, and may contain minority

24 or individual member’s views.
6

•HR 5365 IH

1 (f) TERMINATION.—The Commission shall terminate

2 not more than 30 days after the date of submission of

3 the report required in subsection (e).

4 SEC. 5. DEFINITIONS.

5 For purposes of this Act:

6 (1) POOLING OF INTERESTS.—The term ‘‘pool7 ing of interests’’ refers to the method of accounting

8 for business combinations described in the Federal

9 Accounting Standards Board’s APB Opinion Num10 ber 16, Business Combinations, as in effect on Octo11 ber 1, 2000.

12 (2) SECURITIES LAWS.—The term ‘‘securities

13 laws’’ has the meaning given such term in section

14 3(a)(47) of the Securities Exchange Act of 1934 (15

15 U.S.C. 78c(a)(47)).

Æ