trative Procedure Act and in several respects are more demanding, and were adopted only after considerable study, public exposure for comment, public hearings and widespread support within the private and public sectors. As described in detail in Exhibit A, no Statement of Financial Accounting Standards can be issued without public exposure for at least 30 days, and Statements more frequently are exposed for at least 60 days. No Interpretation may be issued without prior general exposure, or exposure to members of the Advisory Council for comment for at least 15 days. Public hearings on projects are required for all Statements, except those where the Board specifically finds that, on the basis of existing data, it can make an informed decision without a public hearing. Fifteen public hearings, preceded by the circulation of Discussion Memoranda or Exposure Drafts, have been held to date.* Anyone may request to appear and be heard at FASB hearings, and everyone requesting to do so has been granted time to appear and to be heard on the record. In fact, the FASB has even extended hearing dates in order to permit everyone wishing to appear to do so. The FASB presently dributes over 27,000 copies of each Discussion Memorandum, over 37,000 copies of each Exposure Draft, over 100,000 copies of each Statement, and over 90,000 copies of each Interpretation. Anyone can get on the Board's mailing list, and, depending upon the size of the document, at least one and frequently more copies of each Discussion Memorandum and Exposure Draft are free to anyone (including noncontributors) for the asking. There are no limitations on who can ask for and receive free copies, or who can subscribe to the FASB's publications or become an FAF associate member, nor is there any restriction on ordering specific publications directly from the Board. Each FASB member considers comments and position papers submitted by anyone who is willing to take the trouble to write. In addition, all comments and position papers are analyzed by the FASB's staff and copies of analyses are given to each FASB member in connection with his review. The evolution of Statement of Financial Accounting Standards No. 8, "The Translation of Foreign Currency Transactions and Foreign Currency Financial Statements", is illustrative of the degree of public exposure and public participation in the FASB's standard-setting process. The FASB commenced the development of Statement No. 8 by appointing a task force of 14 knowledgeable and interested persons in 1973. A Discussion Memorandum was published on February 21, 1974, and 21,000 copies were distributed. Fifteen presentations were made during two days of public hearings held in New York City in June 1974. After considering the 90 comment letters and position papers received, the FASB issued an Exposure Draft on December 31, 1974, of which 39,000 copies were distributed. The FASB received an additional 191 comment letters on the Exposure Draft. The FASB issued Statement No. 8 in October 1975. The public's participation in the development of Statement No. 8 is not unique. Since the FASB's formation, 2,200 comment letters and position papers have been received on 13 Discussion Memoranda; 322 oral presentations have been made at 15 public hearings; 3,160 Hearings were not held for Statements No. 1, "Disclosure of Foreign Currency Translation"; No. 3, "Reporting Accounting Changes in Interim Financial Statements"; No. 4, "Reporting Gains and Losses from Extinguishment of Debt"; No. 6, "Classification of Short-Term Obligations Expected to be Refinanced"; and No. 10, "Extensions of 'Grandfather' Provisions for Business Combinations." In each case, the FASB concluded it had sufficient data upon which to reach an informed decision, and judged public exposure of the proposed statement to be all that was necessary. comment letters and position papers have been received on 20 Exposure Drafts; and 179 different individuals have served on 14 task forces. The Board's Statements are not dictated as unsupported decrees. In addition to stating the accounting standard, each Statement sets forth, among other things, (i) those FASB members dissenting and their comments in support of their dissent, (ii) the various alternative solutions considered by the Board and the reasons leading to their rejection or acceptance, (iii) a summary of the more significant views expressed in comment letters and position papers received by the Board, and (iv) relevant background information, including results of research undertaken on the project. The FASB's Interpretations must also contain the comments of dissenting FASB members. There is no provision in the FASB's Rules of Procedure for private or informal ex parte "interpretations" and, as a matter of policy, the FASB does not issue them. Arbitrary or self-interested standard-setting could not stand up under these requirements of self-analysis and the FASB's procedures for public comment and participation. The Study criticizes the FASB for reaching substantive technical determinations on standards in meetings not open to the public. In so doing, however, the Study notes that the Government's Cost Accounting Standards Board is exempt under the “Government in the Sunshine Act" when reaching its decisions. The Sunshine Act's exemptions also permit the SEC to hold private meetings if it determines that premature disclosure is likely to result in significant speculation in securities or currency. The FASB considers its technical actions equally sensitive and subject to abuse if disclosed piecemeal or prematurely. In these circumstances, and because the FASB's processes are open to the public at every stage up to decision and the public is provided ample opportunity to consider and comment on the issues and alternatives and the FASB's Exposure Drafts, the FASB has felt it preferable for everyone to become informed of the same information at the same time. B. Public Notice and Public Record In order to maximize public participation and to keep the public informed promptly of significant developments, the FASB's Rules of Procedure require it to make prompt public announcements of projects added to its agenda; assignment of priorities to agenda projects; completion of each significant phase of a project; the availability of Discussion Memoranda and background and other materials; notices of public hearings; the issuance and availability of Exposure Drafts; the availability of transcripts of public hearings; and the issuance and availability of Statements and Interpretations. In addition to press releases, matters of significance are also reported in the Board's newsletter “Status Report”, of which over 38,000 copies are regularly distributed. The Board's present regular mailing list includes 23,000 names. Further, the FASB's Rules of Procedure require that the Board maintain a complete public record available for public inspection at its offices in Stamford, Connecticut. Among the materials required to be maintained in this public record are all written research data and background and other material for public hearings; all written comments and position papers submitted at all stages of the FASB's procedures (other than statistical data of a confidential character and related explanatory text); written comments of Advisory Council members on proposed Statements and Interpretations; the minutes of all meetings of the FAF, FASB and the Advisory Council; transcripts of public hearings; and the votes of FASB members, including dissents, on the issuance of Statements and Interpretations. C. Meetings and Public Communications The FASB meets with interested parties on its own motion or at the request of others as a means of obtaining information as to the impact of implementation of proposed standards and as a means of learning of the concerns of the public. While the Board necessarily has to budget its time and is unable, as a practical matter, to accede to every meeting request, it or its staff regularly participates in meetings when the subject is likely to result in new or additional relevant information which otherwise may not be obtainable. Although the Study has criticized these informal meetings, the FAF's Structure Committee has recommended in its recent report that the FASB and its staff hold more informal meetings as a means of further encouraging and increasing public participation in the standard-setting process. It is interesting to note that the Government's Cost Accounting Standards Board also views meetings as an important means of getting additional information. At every stage of the CASB's deliberations, its staff consults informally with industry representatives and other affected groups in order to discuss and evaluate the need for a cost accounting standard, possible alternatives, the expected costs and benefits, and foreseeable practical difficulties in implementation. On occasion the Board has issued public invitations requesting information relevant to its work. For example, promptly upon commencing operations in 1973, the FASB issued an "open letter" to accounting firms, the financial and business community, analysts, and all interested persons requesting information on the experiences of preparers, auditors and users of financial statements "which would indicate that existing pronouncements need interpretation, amendment or replacement." The Board received over 100 replies, some more than 30 pages, advising as to these matters for consideration by the Board. More recently, the Board issued an open invitation to all interested persons to submit research papers on the economic effects of accounting standards, with particular reference to existing standards and to projects on the FASB's agenda. In issuing this invitation, the FASB stated that all papers submitted would be reviewed and some selected for presentation at its planned conference on economic consequences of accounting standards in early 1978. III. PROGRESS AND SUCCESS OF THE FASB AND ITS PREDECESSORS Review of a complete and balanced record shows that the FASB and its accounting standard-setting predecessors have been successful in establishing meaningful financial accounting standards, responsive both to pervasive and persistent problems of the past and to newly emerging problems in need of prompt solution. A. Significant Accounting Pronouncements In its less than four years of operations, the FASB has issued 14 Statements of Financial Accounting Standards, 18 Interpretations, 20 Exposure Drafts and 13 Discussion Memoranda and has held 15 public hearings, as enumerated in Exhibit D. The FASB's pronouncements, the more significant of which are also summarized in Exhibit D, demonstrate the dedication and attention of the FASB to its objective of establishing and improving financial accounting standards. When considered in conjunction with Exhibit B's analysis of responses on FASB proposals, Exhibit D also demonstrates that the FASB is not "dominated" or "controlled" by "special interest groups", and is willing and able to reduce or eliminate accounting alternatives when reasonable to do so. 208 By way of brief summary certain of the FASB's Statements tave dealt with trad pervasive accounung questions long in need of resolution, such as • Accounting for Research and Development Costs. FAS Satemem. Nr. 2 • Accounting for Contingencies. (FASB Statement No. 5 • Accounting for the Translation of Foreign Currency Transactions and Fores Other Statements have also addressed and resolved long-standing issues, including • Financia Reporting for Segments of a Business Enterprise. FASB Statement Stil other FASB Statements have been issued in response to emerging problems Reporting Accounting Changes in Interim Financial Statements FASB Renoring Gams and Losses from Extinguishment of Debt FASB Statemen • Classification of Short-Term Obligations Expected to be Refinanced FASB reason the • Razumung for Income Taxes-Oil and Gas Producing Companies FASB Another • Acounting for Certain Marketable Securities. (FASB Statement No. Twe cangues wil suffice te illustrate the FASB's willingness to act where as *Actovaung for Research and Development Costs", the FASB eliminated three alternative accepted practices touring that al research and development costs be charged to or eliminate accounting alternatives. In its Statement No. ~ expense when bored iness reed to an item with an alternative future use example a FASB Satemer No. Transactions and Foreign Currency Financial Statements". Prior to that Statement the ware a variety of generally accepted methods of translating foreign currency, including methods were applied to deter recognition of exchange gains until they could be us @ non-current monetan-non-monetary, and variations. Additionally, a vanety of "Accounting for the Translation of Foreign Currency ffcct exchange losses. The FASB provided for translation of asset and liability accounts at by requiring exchange gains and losses to be included in determining net income for the thed rates, thereby eliminating all other alternatives, and eliminated deferral techniques period in which the rate changed The FASH also has a number of significant matters on its current technical agenda Among these are "Financial Accounting and Reporting in the Extractive Industries", h tel in Public Law 94-163; "Accounting by Debtors and Creditors in Troubled Debt pcmmings", "Accounting for Employee Benefit Plans"; and "Conceptual Framework Finomial Accounting and Reporting". Ne bo the FAI's predecessors, the Committee on Accounting Procedure issued a total 1 Scoming Research Bulletins between 1939 and 1959, and its successor, the 25 counting Principles Board, issued 31 Opinions and 4 Statements on a variety of counting matters through 1973, some of the more significant of which are summarized in hibit D. It is interesting to note that for all of its 1,760 pages of text and reproduced information id data, the Study devotes less than two pages to the FASB's accounting standard-setting ctivities and mentions only four of the FASB's Statements-Nos. 2, 7, 9 and 12. Again, he Study's criticisms are wide of the mark, and neither stand analysis nor support its ssertions. For example, FASB Statement No. 2, discussed above, prescribed a uniform standard and eliminated the very practices which are cited in the Study as having contributed to the inancial difficulties of Lockheed, R. Hoe and Talley Industries. In criticizing Statement No. 2 as causing small developing companies to report reduced earnings, the Study also ignores the conclusions of a study conducted by the United States Department of Commerce on the potential economic impact of Statement No. 2 on small developing firms; following interviews with 40 lenders and investors, 11 small, high-technology firms, 11 accountants and selected Government agencies, the Commerce Department's study concluded that the "FASB's Statement Two should not have a significant impact on those firms who have heretofore capitalized R&D." The Study also points to Statement No. 7, "Accounting and Reporting by Development Stage Enterprises", as showing that the FASB sided with established operating companies against their developing potential competitors. Here again, the FASB eliminated a variety of previously acceptable alternatives for development stage companies and required them to apply accounting standards applicable to established operating companies. The Study again fails to note that the FASB did not issue Statement No. 7 until it had considered the potential economic impact on development stage enterprises; as indicated in paragraph 49 of Statement No. 7, the FASB held discussions with 15 venture capital enterprises, whose consensus was that the FASB standard would have little effect on the availability or terms of their future capital. Similarly, with regard to Statement No. 9, the Study fails to credit the FASB with acting promptly to resolve an accounting issue which arose as a direct result of enactment of the Tax Reform Act of 1975. That Act substantially reduced or eliminated percentage depletion as a federal income tax deduction for many oil and gas producing companies, and accounting literature at the time did not address certain questions because before the Act tax deductions generally exceeded capitalized costs. In Statement No. 9, the FASB required, commencing January 1, 1975, all enterprises to record deferred income taxes for intangible development costs and other costs of exploration and development of reserves entering into determination of financial accounting income and taxable income in different periods, unless they had excess statutory depletion. This and other accounting issues applicable to oil and gas producing companies are currently being considered in the FASB's Extractive Industries project. The Study's last venture into accounting analysis relates to Statement No. 12, "Accounting for Certain Marketable Securities". Here the FASB required marketable equity securities to be reflected on balance sheets at the lower of cost or market, and required that any difference from cost be recognized currently in income for securities classified as current assets and in stockholders' equity for securities held for long-term investment. Contrary to the Study's assertions, the FASB reduced accounting alternatives as to like asset classifications of marketable equity securities, and did not discriminate when |