A Letter from Dennis Beresford

On Monday evening I received an email from Denny Beresford, former FASB chair (once again via the AECM listserv). Although I feel compelled to state that Denny's letter does not change my own views on the key issues, it provides much needed balance to my recent posts on the topic of FASB due process:

Tom,

I read your latest Onion, particularly your reasoning "Why Do I Think As I Do?" You list six factors that support your thinking on the matter and I just thought you might like to consider a couple of additional factors.

1. The two new Board members that were appointed by the Trustees of the Financial Accounting Foundation did not join the FASB until today (February 28). Thus, they were not involved in the discussions on accounting for loans and did not vote on that matter.
2. The vote that was taken on that topic in mid-January was unanimous – including Tom Linsmeier and Marc Siegel, who I believe would be described by most FASB observers as "staunch fair value advocates," probably much more so than Bob Herz.
3. The vote to modify the FASB's exposure draft position on the accounting for loans was taken after extensive due process. This included consideration of comment letters (yes, many of them were form letters, and they were considered accordingly), and five public roundtable meetings around the U.S. that included investors, reporting entities, auditors and other interested parties. More directly to the point of your criticism of the FASB, pairs of Board members and staff members conducted meetings with over 100 investors to discuss the key aspects of the proposals. A summary of those discussions dated September 29, 2010 is available on the FASB website.
4. Most commentators – importantly, including most investors – did not agree with the Board's proposal to recognize loans, receivables, and a company's own debt at fair value in the balance sheet. Instead they supported amortized cost for those items, with a more robust impairment approach for loans, which is the approach that the FASB is currently pursuing.

These comments aren't intended to necessarily change your thinking on Bob Herz' departure from the Board or anything else. But I do hope they might help others see that the FASB's activities aren't quite so close minded or otherwise evilly intentioned as might be inferred from reading only the Onion.

Respectfully,

Denny