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The AAO Weblog covers accounting issues and current events as they relate the practice of investment analysis.

Sep 29

Written by: Jack Ciesielski
9/29/2005 7:24 AM 

One of the perennial problems for the Financial Accounting Standards Board: its very existence is supposed to benefit investors more than any other constituency, yet they ignore it. Whenever FASB floats a new rule that might significantly increase reporting clarity, they're deluged with protests from financial statement preparers - while the investing community remains mum.

How come? Any number of possible reasons: many of them don't consider financial reporting important. (They get what they deserve.) They're too busy ("I have thirty stocks to follow and they turn over all the time...") They're free riders ("Someone else will study this - if any good comes out of their effort, I didn't have to spend my time on it.") Or they fear corporate good graces being turned off if they take a public stance on a controversial reporting issue. (See Altera and other analyst retaliation examples.)

The FASB is trying to more actively involve investors by building a ready task force of significant institutional investors. Diya Gullipalli describes FASB's plans in this morning's Wall Street Journal. Take a look at the roster:

"The task force includes asset-management firms like Fidelity Investments, Marsh & McLennan Cos.' Putnam Investments, T. Rowe Price Group Inc., Wellington Management Co., Mellon Financial Corp. and Capital Group Cos. The firms will make their staff available to the board to provide feedback on pending rules."

An excellent idea on FASB's part. Maybe they learned something about the political process when they were going through the stock option battles of the last few years. It'll be a challenge to keep the task force running effectively, but it's worth a try to get investors more involved.