I
107TH CONGRESS
2D SESSION
H. R. 5058
To preserve the integrity of the establishment of accounting standards by
the Financial Accounting Standards Board, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 27, 2002
Mr. STEARNS (for himself, Mr. GREENWOOD, Mr. BILIRAKIS, Mr. BARTON of
Texas, Mr. UPTON, Mr. GILLMOR, Mr. WALDEN, Mr. TERRY, and Mr.
TAUZIN) introduced the following bill; which was referred to the Com-
mittee on Energy and Commerce
A BILL
To preserve the integrity of the establishment of accounting
standards by the Financial Accounting Standards Board,
and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Financial Accounting
Standards Board Act’’.
SEC. 2. DEFINITIONS.
As used in this Act—
(1) FASB.—The term ‘‘FASB’’ means the Fi-
nancial Accounting Standards Board.
(2) FEDERAL
REGULATORY
PROGRAM.—The
term ‘‘Federal regulatory program’’ means a pro-
gram enacted under the authority of the Commerce
Clause of the Constitution and providing for the reg-
ulation of the interstate or foreign commerce of the
United States, or the use of the means or instru-
mentalities of such commerce.
(3) PERSON.—The term ‘‘person’’ includes cor-
porations, companies, associations, firms, partner-
ships, societies, and joint stock companies, as well as
individuals, but does not include an agency or in-
strumentality of Federal, State, or local government.
SEC. 3. STANDARDS AUTHORITATIVE.
The standards of financial accounting and reporting
promulgated by the FASB shall be authoritative for the
purpose of determining compliance with generally accepted
accounting principles by any person under any Federal
regulatory program.
SEC. 4. DUTY OF FASB.
The duty of the FASB shall be to establish and im-
prove, after independent and impartial deliberation, stand-
ards of financial accounting and reporting for any person.
To accomplish its duty, the FASB shall act to—
(1) improve the usefulness to present and po-
tential investors, creditors, and other users, of finan-
cial reporting made by firms in interstate commerce
focusing on the primary characteristics of relevance
and reliability;
(2) keep standards current to reflect changes in
methods of doing business and changes in the eco-
nomic environment;
(3) consider promptly any significant areas of
deficiency in financial reporting that might be im-
proved through the standard-setting process;
(4) promote the international convergence of ac-
counting standards concurrent with improving the
quality of financial reporting; and
(5) improve the common understanding of the
nature and purposes of information contained in fi-
nancial reports.
SEC. 5. REQUIREMENTS FOR ESTABLISHMENT OF AC-
COUNTING STANDARDS.
(a) GENERAL PRINCIPLES.—In promulgating and re-
vising standards of financial accounting and reporting, the
FASB shall follow the following principles:
(1) Financial reporting should provide informa-
tion that is useful to present and potential investors
and creditors and other users in making rational in-
vestment, credit, and similar decisions. The informa-
tion should be comprehensible to those who have a
reasonable understanding of business and economic
activities and are willing to study the information
with reasonable diligence.
(2) Financial reporting should provide informa-
tion to help present and potential investors and
creditors and other users in assessing the amounts,
timing, and uncertainty of prospective cash receipts
from dividends or interest and the proceeds from the
sale, redemption, or maturity of the securities or
loans.
(3) Financial reporting should provide informa-
tion about the economic resources of an enterprise,
the claims to those resources (obligations of the en-
terprise to transfer resources to other entities and
owners’ equity), and the effects of transactions,
events, and circumstances that change resources and
claims to those resources.
(b) OPERATING OBJECTIVES.—The FASB shall pro-
mote the following objectives in the conduct of its activi-
ties:
(1) To be objective in its decision making and
to ensure, insofar as possible, the neutrality of infor-
mation resulting from its standards. To be neutral,
information must report economic activity as faith-
fully as possible without coloring the image it com-
municates for the purpose of influencing behavior in
any particular direction.
(2) To weigh carefully the views of its constitu-
ents in developing concepts and standards. However,
the ultimate determinant of concepts and standards
must be the FASB’s judgment, based on research,
public input, and careful deliberation about the use-
fulness of the resulting information.
(3) To bring about needed changes in ways that
minimize disruption to the continuity of reporting
practice, including establishment of reasonable effec-
tive dates and transition provisions when new stand-
ards are introduced. Change should be evolutionary
to the extent that it can be accommodated by the
need for relevance, reliability, comparability, and
consistency.
(4) To review the effects of past decisions and
interpret, amend, or replace standards in a timely
fashion when such action is indicated.
(c) PRIMARY STANDARD REQUIRING ADHERENCE TO
PRINCIPLES.—
(1) PROMULGATION
REQUIRED.—The FASB
shall promulgate a primary standard requiring the
application of the principles articulated in subsection
(a) of this section to financial accounting and re-
porting. Except as provided in paragraph (2), such
primary standard shall prohibit the application of
any other standard of financial accounting and re-
porting promulgated by the FASB in a manner, or
with a result, that fails to comply with such prin-
ciples.
(2) DEVIATIONS EXPLAINED AND JUSTIFIED.—
The primary standard promulgated pursuant to this
subsection may allow for deviation from the applica-
tion of such principles only if an explanation and
justification for the basis of the deviation is specifi-
cally articulated and made public.
(d) ESTABLISHMENT OF ADDITIONAL STANDARDS.—
The FASB shall develop additional standards of financial
accounting and reporting to address issues relating to—
(1) off-balance-sheet accounting practices and
standards, and accounting requirements for special-
purpose entities, in a manner that is based on prin-
ciples for determining bona fide economic control;
and
(2) requirements for marked-to-market account-
ing, including consideration of the application of fair
value to agreements involving commitments on the
part of an issuer.
(e) ADDITIONAL PROJECTS.—
(1) FAIR
VALUE
PROJECT.—Within one year
after the date of enactment of this Act, FASB shall
complete work on the project entitled ‘‘Measuring
All Financial Assets and Liabilities at Fair Value’’.
(2) REVENUE
AND
LIABILITY
RECOGNITION
PROPOSAL.—Within 18 months after the date of en-
actment of this Act, FASB shall complete work on
the proposal entitled ‘‘Proposal for new agenda
project: Issues relating to the recognition of reve-
nues and liabilities’’.
SEC. 6. PRESERVATION OF AUTHORITY.
Nothing in this Act shall be construed to limit—
(1) the authority of the Securities and Ex-
change Commission under the securities laws (as
such term is defined in section 3(a)(47) of the Secu-
rities Exchange Act of 1934 (15 U.S.C. 78c(a)(47));
or
(2) the authority of any other Federal agency
under the laws applicable to a Federal regulatory
program administered by such agency.
SEC. 7. REPORTS.
(a) FASB REPORTS.—
(1) ANNUAL REPORTS.—The FASB shall trans-
mit annual reports to the President, the Committee
on Energy and Commerce of the House of Rep-
resentatives, and the Committee on Banking, Hous-
ing, and Urban Affairs of the Senate.
(2) CONTENTS
OF
REPORTS.—Each report
transmitted under this subsection shall include the
following:
(A) ASSESSMENT OF RESOURCES.—An as-
sessment by the FASB of the resources avail-
able, and the sufficiency of those resources, to
carry out the purposes and requirements of this
Act.
(B) EVALUATION
OF
COMPLIANCE.—An
evaluation by the FASB of the extent of the
compliance of financial statements with the
standards of financial accounting and reporting
promulgated by the FASB and with the re-
quirements, objectives, and principles of sec-
tions 4 and 5.
(C) PROGRESS ON UNRESOLVED ISSUES.—
A statement by the FASB of the progress made
by the FASB in the resolution of unresolved ac-
counting standards issues.
(D) PROGRESS ON TREATMENT OF INTAN-
GIBLE ASSETS.—A statement of progress made
by the FASB in modernizing and improving the
accounting treatment for intellectual property
and other intangible assets.
(3) REPORT ON PRIMARY PRINCIPLE RESOLU-
TION.—The first report transmitted under this sub-
section shall indicate the resolution by the FASB of
the issues identified in section 5(c).
(b) GAO REPORTS.—
(1) ANNUAL REPORTS REQUIRED.—The Comp-
troller General shall transmit annual reports to the
President, the Committee on Energy and Commerce
of the House of Representatives, and the Committee
on Banking, Housing, and Urban Affairs of the Sen-
ate on the FASB.
(2) CONTENTS
OF
REPORTS.—Each report
transmitted under this subsection shall include the
following:
(A) PROGRESS ON UNRESOLVED ISSUES.—
An evaluation of the FASB’s progress in resolv-
ing unresolved accounting standards issues, in-
cluding a description of such issues, the plans
and timetables concerning, and resources avail-
able for, the resolution of such issues, and the
reasons for any delays in resolving such issues.
(B) ASSESSMENT
OF
FASB
INDEPEND-
ENCE.—An assessment of the extent to which
the FASB has maintained its independence and
objectivity, including an assessment of any im-
pairment of such independence and objectivity
resulting from the methods by which the FASB
obtains the resources required for its oper-
ations.
(C) EVALUATION
OF
PROCEDURES.—An
evaluation of the procedures followed by the
FASB in accounting standard setting, including
the due process accorded to interested parties,
the efficiency of FASB procedures in resolving
issues, and the extent of the compliance by the
FASB with its own procedural requirements.
(c) 
UNRESOLVED
ACCOUNTING
STANDARDS
ISSUES.—For the purposes of this section, the term ‘‘un-
resolved accounting standards issue’’ means the open
agenda items of the FASB and the FASB’s Emerging
Issues Task Force, and any other issues that this Act has
added to that agenda.
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