The SEC Decision Not to Support SFAS 19: A Case Study of the Effect of Lobbying on Standard Setting

In 1977, the Securities & Exchange Commission (SEC) decided to hold public hearings on the acceptability of Statement of Financial Accounting Standards (SFAS) 19 for use under the Energy Policy and Conservation Act and the federal securities acts. This rare step has been characterized as having occurred as a result of the aggressive lobbying in the US Congress to stop SFAS 19. To assess the role of lobbying in the SEC's decision process, interviews were conducted in 1988 with principal participants in these decisions, including Harold Williams, Donald Kirk, and A. Clarence Sampson of the SEC and professional accounting fellow Richard Adkerson. Williams, Sampson, and Adkerson all indicated that they had substantive problems with SFAS 19's deficiencies. While political lobbying played a role, it was not the role generally assumed for it. Evidence suggests that lobbying constituted a destabilizing force that provided the opportunity for the SEC's leadership to extend its current-value initiatives by proposing reserve recognition accounting.