Commentary on the SEC-FASB Partnership

The relationship between the Securities & Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) is not well understood. Nonetheless, during the past 15 years, it has proven to be mutually advantageous, eminently effective, and surprisingly sensible for both agencies. In the financial statements filed by individual SEC registrants, ambiguities in existing standards or practices can mean that similar facts and circumstances are being accounted for differently among registrants. The SEC staff is thus in a position to detect that lack of comparability of information as well as to note questionable trends in financial reporting. In these situations and those that involve new transactions or new ways of doing business, the SEC refers issues to the FASB. Although these 2 agencies have different domains, the channels of communication between them are active and effective. Due to their mutual concern with the public interest, the FASB and the SEC really have a unique "partnership" wherein the FASB sets the standards and the SEC enforces their application in financial statements of individual SEC registrants.