It's a safe bet that the current debate over who should govern accounting rules will never make the evening news. The general public doesn't much know or care whether the SEC is exerting undue influence over the PCAOB, or if Congress is interfering with FASB. In part, that's because disagreements among this alphabet soup of regulators are couched in gentlemanly tones unsuitable for Lou Dobbs or Rush Limbaugh. It doesn't help that the underlying issues are as complicated as they are abstract. Try bringing up derivatives accounting at a cocktail party and see how fast the room empties.
But maybe it's time the evening news, and the public, started to pay more attention. When debate over accounting policy shades into a struggle over who should control that policy, you can be sure the consequences for everyone will be profound. Think back to 1993, and the fight over stock options. FASB's proposal to expense options triggered a pitched battle with congresspeople determined to avoid that outcome. In the end, then–SEC chairman Arthur Levitt intervened to persuade FASB to back down.
That decision, which Levitt came to regret, resulted in record numbers of multimillion-dollar paydays and newly minted millionaires and billionaires. Not that there's anything wrong with that. Still, many now believe that options-enabled compensation spurred some executives to commit fraud, and that such activities ultimately hit the pocketbooks of many ordinary investors and pensioners.
Those financial scandals did, in fact, make the evening news, and paved the way for the Sarbanes-Oxley Act, the underlying catalyst in the current debate. Today, five years after Sarbanes-Oxley, staff writer Kate O'Sullivan surveys the landscape in "The SEC Rules." Her observations suggest that, ultimately, the answer to the question "Who rules accounting?" may take on a global aspect. It's time for Lou Dobbs to learn the meaning of IFRS.