NEWS RELEASE 02/14/02
FASB Chairman Edmund L. Jenkins Testifies Before Congressional Committee on Financial Reporting’s Role in Protecting Investors
Norwalk, CT, February 14, 2002—In testimony given today before the Subcommittee on Commerce, Trade, and Consumer Protection of the House Energy and Commerce Committee, chaired by Representative Cliff Stearns (R — FL), Financial Accounting Standards Board (FASB) Chairman Edmund L. Jenkins outlined the FASB’s role in setting U.S. accounting and financial reporting standards and how they protect investors.
During his testimony, Mr. Jenkins assured Chairman Stearns that the FASB "is prepared and committed to work with the Subcommittee, the Securities and Exchange Commission (SEC) and all other constituents to proceed expeditiously to resolve any and all financial accounting and reporting issues that may arise as a result of Enron’s bankruptcy."
Mr. Jenkins stated that the FASB, like most others, "does not know many of the facts relating to Enron’s financial accounting and reporting." He added that Enron has publicly acknowledged in filings with the SEC, and the findings confirmed by the Special Investigative Committee of Enron’s board of directors, that Enron did not comply with existing FASB standards in at least two areas. In addition, there may be other possible violations of existing requirements.
The FASB Chairman went on to outline his group’s ongoing work and projects aimed at providing significant improvement to various current requirements, including the accounting for special-purpose entities. Mr. Jenkins stated that the FASB has accelerated work on its consolidations project and plans to issue proposed guidance relating to special-purpose entities in the second quarter of this year. In response to concerns raised by SEC Chairman Harvey L. Pitt and others about the speed of the FASB’s standard-setting activities, he commented that the FASB has undertaken several projects to improve its "efficiency and effectiveness without jeopardizing the openness, thoroughness and effectiveness of our open due process."
Mr. Jenkins pointed out that the FASB has no authority or responsibility with respect to auditing, independence or scope of service matters. As a result, the FASB and its accounting standards "cannot alone sustain the transparency necessary to maintain the vibrancy of our capital markets. Other market participants also must carry out their responsibilities in the public interest. Those participants include reporting entities, auditors and regulators."
In pledging the FASB’s best efforts in that process, Mr. Jenkins concluded that "If anything positive results from the Enron bankruptcy, it may be that this highly publicized investor and employee tragedy serves as an indelible reminder to all of us that transparent financial accounting and reporting do matter and that the lack of transparency imposes significant costs on all who participate in the U.S. capital markets."
A copy of Mr. Jenkins’ remarks is attached. The complete testimony filed with the Subcommittee on Commerce, Trade, and Consumer Protection of the House Energy and Commerce Committee may be accessed from the FASB’s website, www.fasb.org.
About the Financial Accounting Standards Board (FASB)
Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors and others rely heavily on credible, transparent and comparable financial information. For more information about the FASB, visit our website at www.fasb.org.
The Financial Accounting Standards Board (FASB)...
Serving the investing public through transparent information resulting from high-quality financial reporting standards, developed in an independent, private sector, open due process.