“The current financial reporting system is characterized by a large volume of standards, including individual standards that are too long or complicated; interpretations; and detailed application guidance from a variety of public and private sources,” says a new, 115-page Progress Report of the SEC Advisory Committee on Improvements to Financial Reporting.  “This volume and complexity have led to concerns about whether the FASB is following appropriate priorities within a consistent conceptual framework in adopting standards, and whether investors, preparers, and auditors can efficiently find the complete body of authoritative literature on an accounting issue.” The Progress Report proposes twelve areas for improvement, including:

• Rather than address specific industries (e.g., banks), any new accounting standards should address business-specific activities (e.g., lending).  Industry-specific guidance should be eliminated prior to any convergence of U.S. and international standards.
• GAAP should presume that “formally promulgated alternative accounting policies should not exist.”
• FASB should solicit representation by experienced investors, large and small.
• The Financial Accounting Foundation should develop performance metrics to assess the FASB’s adherence to its mission statement, including adding an amendment to emphasize avoiding complexity.  The FASB should also form a constituent-based Agenda Advisory Group to further improve its standards-setting process and timeliness.
• The FASB should remain the sole standard setter in accounting while the SEC should issue broadly interpretative guidance in “limited situations.”

Last week the SEC posted a Request for Comments, due thirty days after the Progress Report is published in the Federal Register—presumably on or before March 14, 2008.

PCAOB discussion.  Today, February 27, 2008, a Public Company Accounting Oversight Board (PCAOB) panel will meet to discuss the Progress Report and its proposals.  The PCAOB briefing paper is here.