UPDATE 2-Bush, G20 asked to support accounting independence

(Adds IASB details)

By Emily Chasan

NEW YORK, Nov 14 (Reuters) - The chairman of the body that oversees U.S. accounting rulemakers has asked U.S. President George W. Bush and the Group of 20 summit to support the independence of global accounting standard-setters.

In a letter dated Nov. 13, Financial Accounting Foundation Chairman Robert Denham said he was "very concerned" about "political solutions to perceived flaws in certain accounting standards."

He charged that political pressures had been "brought to bear" on the London-based International Accounting Standards Board to alter its standards on mark-to-market, or fair value accounting.

"We believe the integrity and independence of the accounting standard-setting process is of critical importance to investors worldwide," Denham said in the letter.

The Financial Accounting Foundation is the independent body that oversees U.S. accounting rulemakers at the Financial Accounting Standards Board.

Last month the U.S. Securities and Exchange Commission and FASB jointly agreed that banks could rely more on internal estimates, rather than fire-sale prices to value assets trading in illiquid markets. A few days later the IASB also said European companies could take a less damaging option of valuing assets they intend to hold rather than sell.

But that change has not stopped bankers and politicians from pushing for further changes. The American Bankers Association has asked the SEC to override the FASB's rules on mark-to-market accounting and, as part of the $700 billion U.S. bailout bill, the SEC was required to study fair value. Several members of Congress have urged that the rules be suspended.

Critics of mark-to-market accounting have said the accounting rules forced billions of dollars worth of writedowns at banks, creating a downward spiral where each writedown provoked further writedowns and froze up the market.

Denham said in the letter that world leaders should support the open and due process used by the rule makers, which includes soliciting public comment letters from interested parties and a series of deliberations on each standard.

"This support will do more to restore confidence in the capital markets than legislating accounting standards in a way that reduces the reliability and transparency of financial information presently available to investors," Denham wrote.

The letter was copied to U.S. Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke, the five U.S. Securities and Exchange Commissioners and several key U.S. legislators.

The Chairman of the trustees of the IASC Foundation, which oversees the IASB, also sent a letter to Bush this week saying fair value accounting rules should not be altered outside the normal process, but that the board will continue its efforts to improve the accounting rules "expeditiously."

"Issues related to fair value accounting are complex, with consequences which need careful evaluation. They are not necessarily conducive to immediate fixes," Gerrit Zalm, the former Deputy Prime Minister and Minister of Finance of the Netherlands, wrote in the letter dated Nov. 11.

Zalm said the IASB and FASB are establishing a "high level advisory group to report rapidly" on how improvements in accounting rules could help investor confidence in the markets.

World leaders headed to Washington on Friday for the G20 summit. They have vowed to work together to overhaul the global financial system and find a way to avoid future meltdowns. The summit is being hosted by President Bush. (Reporting by Emily Chasan; Editing by Lisa Von Ahn, Andre Grenon and Matthew Lewis)