CUNA Comment Letter

CUNA Does Not Support Proposed Changes to Streamline FASB

April 17, 2002

Mr. Joseph S. LaGambina, Executive Vice President
Financial Accounting Foundation
401 Merritt 7
Norwalk, CT 06856-5116

Re: Financial Accounting Foundation Request for Comments on Proposed Changes to Streamline the Financial Accounting Standards Board

Dear Mr. LaGambina:

The Credit Union National Association appreciates the opportunity to comment on the Financial Accounting Foundation’s proposal to improve the structure of the Financial Accounting Standards Board and the process under which accounting standards are developed. By way of background, the Credit Union National Association represents more than 90% of our nation’s more than 10,300 state and federal credit unions. Over 82 million consumers in this country belong to credit unions.

The Enron catastrophe and public concern about accounting practices and standards which subsequently ensued have required FASB and the Foundation to reconsider whether the Board is fulfilling its role as the independent arbiter of financial reporting standards. Clearly, questions have been raised about the independence of FASB and the process under which financial accounting standards are determined. To address those concerns, the Foundation has proposed three broad changes designed to improve the standards-setting process. It may be too late for FASB to reconfigure its Board and decision-making process on its own, as legislation is already progressing in Congress to address these key issues. Nonetheless, CUNA would like to offer its views on the proposal advanced by Foundation as one avenue to help ensure the interests of credit unions and their members are represented as the accounting standards-setting process evolves.

Credit unions, as regulated financial institutions that follow GAAP, are keenly affected by FASB standards. Thus, CUNA supports a standards-setting process that will consistently result in the availability of information that consumers may rely upon to make well-informed financial decisions. This would include accounting standards that allow credit unions to fairly and accurately represent their not-for-profit, cooperative structure. This has not always been the case, as increasingly credit unions are concerned that FASB seeks to develop homogenous financial institution standards that do not reveal the unique nature of credit unions.

The Foundation is seeking comments on whether it should reduce the size of FASB from 7 to 5 members, with the goal of streamlining the standards-development and setting process. It is unclear based on the information provided in the request for comments the extent to which a reduction of two Board members will actually reduce the amount of time to propose and develop guidelines and standards.

Assuming that such a reduction would result in quicker standard setting, CUNA does not believe that such an acceleration of the standards-setting process is the correct goal for the Foundation. Rather, we believe the focus should be on ensuring that FASB has all relevant information before adopting new policies, including how any new guidelines and standards will affect commerce, such as credit union operations (particularly smaller entities.) While it is essential that FASB remains neutral in its deliberations, it is likewise critical that FASB fully considers the impact of its decisions not only on the accounting profession, but also on those entities to which the standards apply. We believe the best way to accomplish that goal is to bring FASB under the Administrative Procedure Act (APA) and to ensure adequate oversight, through an enhanced role for the Securities and Exchange Commission such as under the House Financial Services Committee legislation. (We discuss the APA further under the recommendation regarding reducing the comment period.)

The Foundation is also seeking comments on whether the Board should no longer require a supermajority voting in the affirmative to approve new standards. Under the proposal, only a simple majority of 3-2 would be required. Again it is unclear the affect this change would have. If the change means the FASB would be able to adopt more complex standards, with less consideration for their impact on small businesses and in a shorter time frame, then we cannot support this proposal.

The third change on which the Foundation seeks comments is whether it should provide a shorter comment period for proposed standards. This would be extremely counterproductive and would likely result in less efficiency in the standards-setting process as accountants and affected entities would have less time to consider the impact of a proposal and provide comprehensive information to FASB.

In this connection, we believe that the FASB should follow the standards of the Administrative Procedure Act, which federal agencies are required to follow in setting new rules. Among other things, the APA requires agencies to publish proposals in the Federal Register and provide for a sufficient comment period on substantive policy changes. While FASB is not currently required to do so, adhering to the APA would facilitate the ability of all interest parties to comment to FASB on proposed guidelines and standards and help ensure their due process is preserved. It would also help ensure that FASB has received input from all affected parties and takes such input into full account when developing new standards.

In closing, thank you for the opportunity to share our views on the Foundation’s request for comments regarding FASB. We would welcome the opportunity to discuss our views further on these issues.


Mary Mitchell Dunn
Associate General Counsel and
Senior Vice President
Credit Union National Association