In Friday's Wall Street Journal
For years, one of the chief differentiators our capital markets had was a clear and transparent system of financial reporting. Over the past decade, however, signs of erosion have come to light: from the ease by which executives were able to manipulate numbers in order to mask a company's true performance to the creative accounting undertaken by many cities and states to hide unfunded pension obligations. To preserve the privileged position of the U.S. capital markets, we need to reinvigorate and re-engineer the organizations responsible for setting the accounting standards upon which our market system rests.
Specifically, the Financial Accounting Standards Board (FASB) and its sister, the Governmental Accounting Standards Board (GASB), the two groups that set accounting standards, must be reconfigured to keep our markets healthy. These boards have fallen captive to constituent groups, slowing their progress or even diverting their efforts to keep pace with critical issues. As a result, standards fail to provide investors with transparent, comprehensive and understandable measures of resources or performance. ...
Many members of the FASB and GASB are devoted to creating a strong financial reporting system. However, intense interest-group lobbying has delayed action and severely compromised stock-option expensing, pension accounting rules, and now threatens lease-accounting standards. When the FASB falls prey to these compromises, the resulting standards can end up being overly complex and confusing.
