Congress’s unprecedented meddling in accounting rules imperils quality and independent financial reporting, Financial Accounting Foundation Chair Kathleen Casey said.
“We were very disappointed by this action and continue to work to protect and defend the integrity of GAAP and the standard-setting process,” Casey said Wednesday, referring to U.S. generally accepted accounting principles, which are written by the Financial Accounting Standards Board. She made the remarks during a FAF trustees meeting.
Congress in March offered banks the option to delay a massive accounting change they were supposed to start following this year. Tucked into the $2 trillion coronavirus relief law (Public Law 116-136) was a provision that allowed banks to put off the current expected credit losses (CECL) standard until the end of the year or until the national emergency is declared over. It was the first time Congress successfully thwarted FASB’s work.
Casey cautioned Congress against taking similar action again, saying, “it will be vital that we preserve confidence in accounting standard-setting and the quality of financial reporting that supports the strength and growth of our markets and our economy.”
The Financial Accounting Foundation is the parent group of FASB. FASB’s CECL accounting rule is considered the biggest change to bank accounting in decades, requiring banks to look to the future and calculate expected losses on loans rather than tallying them when they have already happened.
The vast majority of banks required to adopt the new rules on Jan. 1 chose to follow the rules on time, but some smaller banks chose to avail of Congress’s relief.