The author of the article speaks about the beginning of a long process of congressional meeting into the Enron case, the largest corporate bankruptcy in the history of the United States. The limited success that F.A.S.B. achieved due to the constant meddling of Congressional members was one of the biggest contributing factors to the bankruptcy case. Had the F.A.S.B. actually got serious about making reforms of the current accounting model, like adjusting reported earnings for changes in current prices of assets, recognizing and amortizing many intangible assets that were not even seen on the balance sheet; the Enron debacle would have been easily avoided. A lot of investors along with likes of Warren Buffett and the S.E.C. also supported most of F.A.S.B.’s initiative but were given a blind eye by the Congress.
F.A.S.B should have taken a stronger stance in passing laws since Congress will at times make biased decisions since it’s clear that the law makers always serve corporate interests and not those of investors because that’s where the biggest chunk of the campaign funds lies. Enron was a crisis that could have been avoided had the Congress not intervened in accounting policies that they have little knowledge about. It’s another blatant example of the misuse of bureaucratic power proving the arrogance of a group of individuals, blinded with power, greed and money; that for a couple of dollars would sell their souls to the devil. The underlying truth which is never sensationalized or what does not come to light is the lives of the millions of small investors that get affected when these companies go bust. Who is accountable for this blatant disregard for the retailer’s wealth? Where do we draw the line?
I agree with Liron’s assessment. When reading the section of the article that commented on FASB’s proposal that companies record a deduction in earnings when employee stock options are issued, I was struck by how Congress ignored the expertise of not only FASB, but also financial investors such as Warren Buffett. In this case, Buffett and the FASB were both advocating for a more honest assessment of a company’s value, and Congress prevented FASB from issuing this new standard. In some ways, this article seems like it was written before its time, as the comments made about Congress’s accountability for the Enron bankruptcy could also be made about Congress’s role in contributing to the housing crisis because of the lack of strong regulation in the credit rating industry.
The FASB’s goal is to improve corporate accounting practices by defining guidelines and rules. Their expertise comes from its members having a vast amount of knowledge as they are drawn from the professional community of certified public accountants, financial analysts, executives, educators, investment bankers and government bureaucrats. As an independent nonprofit corporation, I believe that Congress should leave the accounting standards and regulations for the FASB to make although Congress should keep making sure that the FASB is staying independent and neutral.