Legislation proposing the creation of a
new Federal Accounting Oversight Board (FAOB) to oversee the
application of accounting standards to financial markets has been
introduced to US Congress.

The bill was introduced by Congressmen Ed
Perlmutter and Frank Lucas, members of the House Financial Services
Committee, who said it is designed to help ease future economic

The new FAOB would share power currently held
by the US Securities and Exchange Commission (SEC) with
representatives from four other organisations. The FAOB would be
comprised of the SEC chairman, the Federal Reserve chairman, the
Treasury Secretary, the Federal Deposit Insurance Corporation
chairman and the Public Company Accounting Oversight Board

The SEC alone currently determines how GAAP
applies to financial markets.

The Congressmen said the new board “fits into
responsible regulatory reform because a broader group of
individuals with a view of the greater economy should be in charge
of applying GAAP”.

The bill is intended to create an environment
where the Financial Accounting Standards Board will have the
flexibility to adjust GAAP for future economic conditions. It
states that accounting standards should handle illiquid and liquid
assets differently.

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In approving and overseeing accounting
standards and principles, the bill said the FAOB should consider
issues including the extent to which accounting standards expose
the US public and financial markets, as well as global financial
markets, to systemic risk.

The board would also consider whether
standards should apply to distressed markets differently than
well-functioning markets.

The American Bankers Association (ABA) has
welcomed the bill.

“The Perlmutter-Lucas Bill represents
much-needed reform that will help address systemic risks that
accounting standards can have on the economy,” ABA president Edward
Yingling said.

Both the PCAOB and the SEC said they do not
comment on pending legislation.