'Special interests' undermining standard setting: Herz

Companies which had to be bailed out by the American taxpayer tried to lobby the US standard setter in the wake of the global crisis, a senior financial figure has warned.

Financial Accounting Standards Board chairman Robert Herz said companies which had to be rescued by the American government lobbied the accounting standard setter in a move which had the potential to undermine the integrity of the body and politicise the independent account setting process.

In a speech, delivered to the US National Press Club, Herz said the politicisation on behalf of `special interests' risked eroding public confidence in financial reporting.

`Unfortunately, there have been certain major companies — including ones that subsequently failed and had to be rescued by the government — and industry trade groups that have sought political intervention into accounting standard setting,' he said.

`While that is their right, and while we certainly welcome active dialogue with lawmakers, politicisation of accounting standard setting by special interests risks undermining public confidence in the integrity of financial reporting.'

The comments follow recent criticism of FASB by oversight body the Investors Technical Advisory Committee, which said the US standard setter's independence risked undermined by private interests.

`[We have] grave concerns about what we believe to be a substantial erosion in the independence of the accounting standard setting process,' the committee said in a letter.