Sen. Michael Enzi on Thursday, Nov. 13, urged FASB to create an advisory committee to represent the interests of fledgling high-tech and biotechnology firms. The accounting board, a private organization that sets standards for financial accounting and reporting, often ignores the impact of its guidelines on small companies, said the Wyoming Republican, who issued the demand as an addendum to his testimony Wednesday before a Senate banking subcommittee.

"The board, in its attempt to quell the accounting problems of companies in the Fortune 500, may have overlooked or have not paid enough attention to how the draft statements and interpretations may affect many entities," Enzi said. He also said FASB must seek more input on its rules from smaller companies.

Spokeswoman Sheryl Thompson said that FASB chairman Robert Herz will consider establishing a small-company advisory group.

FASB in May proposed a rule, known as Statement No. 123, that requires private companies to report stock options as cash expenses. Currently, corporate expensing of options is voluntary.

Small companies complain that this would greatly increase the costs of issuing options, which would make it harder to recruit and retain top employees. It also could drive companies to export jobs outside of the U.S. in order to cut costs, they claim.

In particular, many computer, software and semiconductor makers say FASB's proposed rule would force them to cut profits and abandon the use of options. "The adoption of this proposal may place U.S. small business at a competitive disadvantage with overseas companies that will not be bound by the standards," Enzi said.

Another proposal, Statement No. 150, requires closely held companies to treat a number of popular financial instruments, such as "mandatory redeemable" shares and put options, as liabilities instead of booking them as equity.

Mark Heeson, president of the National Venture Capital Association, told the subcommittee that FASB's actions threatened the viability of startup concerns. "We have a grave concern that their 'rush to regulate' has needlessly burdened young companies," he said in prepared testimony.

Herz assured lawmakers that FASB's rulemaking process was fair and objective even for startups, noting that the board meets regularly with smaller businesses and is committed to all its constituents. But he drew the line at establishing separate accounting rules for small and large businesses, as some small business advocates have urged. Herz said such a "two-tiered system" would add to costs and undermine efforts to simplify accounting standards.

Enzi also called on FASB to make it easier for small companies to participate in the group's board's meetings.