Edmund L. Jenkins, chairman of the Financial Accounting Standards Board, will retire next summer, ending a tenure marked by rulings that profoundly altered the way companies account for and report their financial status.
Under Jenkins, FASB issued FAS 133, which requires companies to mark derivative investment values to market. Before FAS 133, says Jenkins, derivative values “were recognized only after they were settled. For many companies, that was too late.” FAS 133 “forced management to focus on the risks they take.”
Perhaps the most striking rulings during Jenkins’s reign were FAS 141, which ended pooling, and FAS 142, which eliminated amortization of goodwill and certain intangibles. These rulings, insists Jenkins, “make a significant difference in the kind of information offered to investors and the transparency of that information.” Some CFOs say FASB departed from its conceptual role and issued rulings that were too complex. “If they provide a framework, they will be excellent documents,” says Bristol-Myers Squibb Co. CFO Frederick Schiff. “If we see pages and pages of subsequent technical interpretations, these will not be successful standards.”
Jenkins also raised FASB’s political savvy a few notches. Before him, “the perception was FASB was aloof from the political process altogether,” says Manley H. Johnson, chairman of the Financial Accounting Foundation. “It was considered a green-eyeshade organization sitting in an ivory tower.” The likable Jenkins established a ubiquitous presence on Capitol Hill, improving relations with Congress and boosting FASB’s ability to overcome opposition from lobbyists.