An exchange between the Honorable Edward J. Markey, Chairman, U.S. House of Representatives Subcommittee on Telecommunications and Finance, Committee on Energy and Commerce and the Honorable Arthur Levitt, Jr., Chairman, Securities and Exchange Commission

An exchange between US Rep. Edward J. Markey and SEC chairman Arthur Levitt, Jr. on the roles of the SEC and FASB in setting accounting standards, with particular emphasis on proposals to change existing accounting rules for certain types of employee stock options, is presented. Markey states that FASB clearly does not believe it has the authority or the expertise to analyze the economic and social impact of its accounting proposals, and it apparently believes that it should not be vested with such responsibilities. By contrast, the SEC clearly enjoys a broad mandate from Congress to promote the smooth functioning and effectiveness of US capital markets. The SEC's authority to review FASB decisions raises crucial public policy questions. In a reply, Levitt notes that in 1938, the SEC decided against the development of its own treatise on accounting and instead decided it would look to the accounting profession for leadership in establishing and improving accounting standards.