Rule-makers

As the dust slowly settles on last year's accounting scandals, the stage is set for a major shift in accounting practice. With Robert Herz as its chairman, the Financial Accounting Standards Board has a remarkably ambitious program, and a renewed dedication to fair-value accounting (see "Questions of Value"). The last time FASB had such a controversial agenda, the issue was accounting for stock options, and the board nearly collapsed before a well-organized and well-funded coalition of high-tech companies and politicians.

This time around, the players are more evenly matched. FASB has the weight of public opinion behind it, as well as the Sarbanes-Oxley Act, which presumably implies congressional support. With Herz's ties to the International Accounting Standards Board, and Paul Volcker's leadership as head of the IASB oversight committee (see "Standards Bearer"), the international group is showing a budding ability to run interference for its American cousin. Indeed, the agendas of both groups are closer to convergence than anyone would have believed possible, now that U.S. GAAP has lost some of its luster.

No one should discount the determination or effectiveness of the business lobby. But between the scandals and the bear market, the climate is ripe for change. And with a newly empowered FASB, get ready for new rules.

Julia Homer, Editor-in-Chief