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SECTION 1. SHORT TITLE.

This Act may be cited as the ''Financial Accounting Fairness Act of
1998''.

SEC. 2. FINDINGS.

The Congress finds the following:
(1) The Financial Accounting Standards Board was
established in 1972 as a private sector body to establish and
improve financial accounting principles.
(2) In 1973, the Securities and Exchange Commission, which
is statutorily empowered to prescribe accounting principles to
be used in financial statements filed with the Securities and
Exchange Commission and otherwise used pursuant to the Federal
securities laws, established a presumption that financial
statements that do not comply with financial accounting
principles promulgated by the Financial Accounting Standards
Board would be misleading and therefore in violation of those
laws.
(3) Since 1973, financial accounting principles established
by the Financial Accounting Standards Board accordingly have
generally had the full force and effect of Securities and
Exchange Commission regulations.
(4) Questions have been raised as to whether under these
circumstances persons aggrieved by a Financial Accounting
Standards Board pronouncement of financial accounting
principles would have the right to judicial review thereof, and
whether such pronouncements must comply with statutory and
other requirements applicable to the promulgation of Securities
and Exchange Commission.
(5) Congress believes it appropriate to provide that, under
these circumstances, such promulgations by the Financial
Accounting Standards Board are covered by statutory and other
requirements relating to the adoption of regulations by the
Securities and Exchange Commission, including provisions
relating to judicial review and provisions, among other things,
requiring that the Commission consider whether proposed
regulations would promote efficiency, competition, and capital
formation.

SEC. 3. AVAILABILITY OF JUDICIAL REVIEW.

Section 19 of the Securities Exchange Act of 1934 (15 U.S.C. 78s)
is amended--
(1) by adding at the end of the heading of such section the
following: ''; oversight of accounting principles''; and
(2) by adding at the end the following new subsection:
''(j) Review of Financial Accounting Principles.--
''(1) Express approval of accounting principles required.--
The Commission shall not treat any proposed accounting
principle of any accounting standards board as a generally
accepted accounting principle for purposes of any financial
statement, report, or other document required under any of the
securities laws unless such proposed accounting principle has
been approved by the Commission in accordance with the
requirements of this subsection. The Commission shall not treat
any such statement, report, or document as being without
substantial authoritative support because of the failure of
such statement, report, or document to comply with any proposed
accounting principle until such proposed accounting principle
has been approved by the Commission in accordance with the
requirements of this subsection, or the Commission has
otherwise expressly provided by rule or regulation.
''(2) Review of accounting principles.--Each accounting
standards board shall file with the Commission, in accordance
with such rules as the Commission may prescribe, copies of any
proposed accounting principle or any proposed change in,
addition to, or deletion from the accounting principles of such
board (hereinafter in this subsection collectively referred to
as a 'proposed accounting principle') accompanied by a concise
general statement of the basis and purpose of such proposed
accounting principle. The Commission shall, upon the filing of any
proposed accounting principle, publish notice thereof together with the
terms of substance of the proposed accounting principle or a
description of the subjects and issues involved. The Commission shall
give interested persons a reasonable opportunity to submit written
data, views, and arguments concerning such proposed accounting
principle.
''(3) Procedure for review.--Within 35 days of the date of
publication of notice of the filing of a proposed accounting
principle in accordance with paragraph (2) of this subsection,
or within such longer period as the Commission may designate up
to 90 days of such date if it finds such longer period to be
appropriate and publishes its reasons for so finding or as to
which the accounting standards board consents, the Commission
shall--
''(A) by order approve such proposed accounting
principle, or
''(B) institute proceedings to determine whether
the proposed accounting principle should be
disapproved.
Such proceedings shall include notice of the grounds for
disapproval under consideration and opportunity for hearing and
be concluded within 180 days of the date of publication of
notice of the filing of the proposed accounting principle. At
the conclusion of such proceedings the Commission, by order,
shall approve or disapprove such proposed accounting principle.
The Commission may extend the time for conclusion of such
proceedings for up to 60 days if it finds good cause for such
extension and publishes its reasons for so finding or for such
longer period as to which the accounting standards board
consents. The Commission shall not approve any proposed
accounting principle prior to the 30th day after the date of
publication of notice of the filing thereof, unless the
Commission finds good cause for so doing and publishes its
reasons for so finding.
''(4) Grounds for approval.--The Commission shall approve a
proposed accounting principle of a board if it finds that such
proposed accounting principle is consistent with the public
interest and the protection of investors. The Commission shall
disapprove a proposed accounting principle of a board if it
does not make such finding. In determining whether such
proposed accounting principle is consistent with the public
interest, the Commission shall also consider, in addition to
the protection of investors, whether the principle will promote
efficiency, competition, and capital formation. The Commission
shall not approve a proposed accounting principle that would
impose a burden on competition not necessary or appropriate in
furtherance of the purposes of this title.
''(5) Consultation with banking agencies.--In reviewing any
proposed accounting principle that will apply to any persons
subject to examination by or reporting requirements of a
Federal banking agency, the Commission shall consult with and
consider the views of each such Federal banking agency. If a
Federal banking agency comments in writing on a proposed
accounting principle that has been published for comment, the
Commission shall respond in writing to such written comment
before approving or disapproving the proposed accounting
principle. The Commission shall, at the request of a Federal
banking agency, publish such comment and response in the
Federal Register at the time of approving or disapproving the
proposed accounting principle.
''(6) Agency record.--At the time of filing any proposed
accounting principle under paragraph (2), an accounting
standards board shall submit to the Commission the record of
its proceedings in connection with such principle. Such record
shall include all written comments or statements filed with the
accounting standards board with respect to the proposed
accounting principle and all written communications between the
accounting standards board and any person relating to the
proposed accounting principle. The Commission, in reviewing a
proposed accounting principle, shall keep in a public file and
make available for copying the record submitted by the
accounting standards board and all written statements filed
with the Commission with respect to the proposed accounting
principle and all written communications between the Commission
and any person relating to the proposed accounting principle.
The Commission shall not be required to keep in a public file
or make available for copying any such statement or
communication that it may withhold from the public in
accordance with section 552 of title 5, United States Code.
''(7) Judicial review available.--Any proposed accounting
principle that the Commission has approved under paragraph (4)
shall, for purposes of section 25 of this title, be considered
to be a rule of the Commission promulgated pursuant to this
section.
''(8) Definitions.--For purposes of this subsection:
''(A) Proposed accounting principle.--
''(i) Accounting principle.--The term
'accounting principle' means a statement or
interpretation of a standard or concept of, or
guidance with respect to, financial accounting
or reporting, but does not include any
technical bulletin, discussion memorandum,
invitation to comment, special or research
report, or response to an inquiry or other
request.
''(ii) Proposed accounting principle.--The
term 'proposed accounting principle' means an
accounting principle that has been formally
adopted or ratified by the standard-setting
body of an accounting standards board.
''(B) Accounting standards board.--The term
'accounting standards board' means an accounting
standards-setting organization whose principles are,
pursuant to rules or regulations of the Commission,
treated by Commission as generally accepted accounting
principles for purposes of any financial statement,
report, or other document required to be filed under
any of the securities laws.
''(C) Federal banking agency.--The term 'Federal
banking agency' has the meaning provided in section
3(z) of the Federal Deposit Insurance Act (12 U.S.C.
1813(z)).
''(9) Effective Date.--The provisions of this subsection
shall apply with respect to any accounting principle that is
formally adopted or ratified by the standard-setting body of an
accounting standards board on or after January 1, 1998.''.
Financial Accounting Fairness Act of 1998 - Amends the Securities Exchange Act of 1934 to prescribe guidelines under which the Securities and Exchange Commission (SEC) must review and approve accounting principles proposed by an accounting standards board as a prerequisite to SEC treatment of: (1) such proposals as generally accepted accounting principles; and (2) industry financial statements as being non-compliant with generally accepted accounting principles.
Includes within such guidelines: (1) SEC consideration of investor protection, and the promotion of efficiency, competition, and capital formation; (2) SEC consultation with Federal banking agencies; (3) a public file of the record engendered by a proposed accounting principle; and (4) the availability of judicial review.