WASHINGTON, JULY 18, 2003 - "I am concerned that complex financial accounting standards, such as those addressing derivatives and hedging activities, as applied, are producing different pictures of companies' economic well being when those companies are essentially in the same line of business," stated Rep. Cliff Stearns, Chairman of the Commerce, Trade & Consumer Protection Subcommittee. "Just look at the impact of the standard for accounting for derivatives on Freddie Mac's and Fannie Mae's financial statements for 2002. In this hearing, we will examine the efficacy of those standards and their application."
Stearns explained, "The standard for accounting for derivative instruments and hedging activities is nearly 800 pages long. Invariably, you'll get reasonable accountants disagreeing with respect to the application of the 800 page rule. Therefore, the rule as applied can produce different results from company to company undermining an investors ability to make informed decisions based on comparisons of those companies' financial statements. I think the Financial Standards Accounting Board should consider revisiting its approach to standard setting with an eye towards simplicity and consistency."
"Last year I introduced HR 5058 requiring financial accounting standards which were principles based. I plan on introducing similar legislation in the 108th Congress," added Stearns.
The hearing titled "FASB Derivative Accounting Standards" will be held Tuesday, July 22, 2003 at 2:00 pm in room 2123 Rayburn. Scheduled to testify are Mr. Marty Baumann, Executive Vice President, Chief Financial Officer, Freddie Mac; Ms. Leslie Seidman, FASB; Mr. Peter Wallison, American Enterprise Institute; and Dr. Thomas Linsmeier, Eli Broad College of Business, Michigan State University.
For Further Information Please Contact Paul Flusche at 202-225-5744 or Email.
