Thank you Chairman Gramm.
I would like to begin my remarks, this morning, by acknowledging the Financial Accounting Standards Board, which we all know as FASB, for its important role in our private sector economy.
The FASB is a private sector review board, created initially by the accounting profession to establish accounting standards which can be uniform over all segments of the economy and recognized by both the private sector and government entities as the arbiter of accounting policies and standards. FASB has been successful in that endeavor and in that respect is a model of self governance. Those of us who believe very strongly in the primacy of the private sector are anxious that FASBís role continue.
Though the Securities and Exchange Commission has been granted authority by Congress to have oversight over financial reporting of publically traded companies, the SEC, in turn, has relied on FASB pronouncements as the authoritative word.
This symbiotic relationship involving the SEC, FASB, Congress, the accounting profession and last, but certainly not least the business community inevitably means that at times accounting standards become a matter of public policy and therefore subject to Congressional oversight. In fairness to the FASB, I am quick to point out that this Congressional oversight role is one which FASB has acknowledged as being appropriate.
Todayís oversight hearing certainly qualifies as a matter of important public policy. While I donít pretend to have the background necessary to be a rule maker on accounting standards, I must say that I have been more than a little surprised by the decibel level which the issue of pooling versus purchase has reached. This is particularly true among members of the technology and financial services industries, as these industry groups have been among the most frequent in using pooling treatment in their mergers and acquisitions. I think it is fair to say that some representatives of these industries are concerned that their side of the issue has not been given a full or thorough hearing. That is why we are here today, and appropriately so.
The underlying issue, it seems to me, is not in choosing between the current pooling or purchase treatment, but rather is the broader issue of how to best value intangible property and more specifically intellectual property utilizing accounting standards. This will be no small task, and I understand that the Securities and Exchange Commission has initiated a study of that issue being conducted under the direction of Yale University Dean Jeffrey Garten. As increasing improvements in technology redefine our economy, it is logical to expect that accounting standards will need to be adjusted in order to reflect those changes.
I am hopeful that in todayís deliberations we will gain a sense of how the economic realities of todayís business combinations are best reflected under alternative accounting treatments, and whether any proposed changes will be in the broad public interest.
Thank you panelist and thank you Chairman Gramm.