“The simple truth is that when you have two independent, highly competent boards, sometimes they will agree with each other, and other times they will not,” he said. “It’s not that one is right and the other wrong; they just reach different conclusions. The same would be true if I were to split my board in two and ask them to consider 10 projects. I doubt each smaller board would reach identical conclusions on all 10 projects, so convergence would require compromises to be made. Convergence therefore does not always result in the highest quality outcome. It has served its purpose, but now it is time to move on. [AT]
Tag: Accounting rule convergence
What Are the IASB and FASB Smoking?
[T]he tediously-reported proclamation of real convergence commitment has never been more than a smokescreen behind which the divergent interests of the Americans and the Europeans have knocked heads to the point of insensibility. (For which, recall the continued fudging of the SEC as to whether, if ever, that agency is even going to confirm a date certain on which to decide if to weigh in or not […].) Why no-one has called the question on this endless charade reflects the two-level fantasy in the dialog: the IASB and the FASB both pretend to believe in the desirability of fully-converged accounting standards, and the community of financial statement issuers and users pretend to believe them. [Re:Balance]
IASB Chairman: We Don’t Issue Low-Quality Accounting Standards
Rule makers concluded this week that “we all could benefit from a few more months to develop these standards, some of which really go to the core issues of many companies,” said Leslie Seidman, chairman of FASB, in a podcast issued Thursday. Sir David Tweedie, chairman of the IASB, said rule makers still intend to finish their convergence work by year’s end. The delay, he said in the podcast, will “enable us to check whether our conclusions will last the test of time. … We would never release a standard before it is ready and ultimately it must be a high-quality standard or you just can’t issue it.” [WSJ]
Accounting News Roundup: EisnerAmper Partner: GM Balance Sheet ‘Stronger’ Ahead of IPO; KPMG Moves on From New Century, Countrywide; No Bookie Needed for Betting on Grades | 08.19.10
GM’s balance sheet draws praise ahead of IPO [MarketWatch]
“Peter Bible, partner-in-charge at accounting firm EisnerAmper LLP, said General Motors is now carrying a much stronger balance sheet than its predecessor, based on the company’s initial public offering filed late Wednesday. ‘Their debt-to-equity ratio looks handsome,’ Bible said in an interview. ‘This thing has gotten restructured quite a bit. GM’s health care liabilities have fallen significantly. As I look at the balance sheet, it is much healthier.’ “
Move to converge just exported crisis [Re: The Auditors]
KPMG has put two major lawsuits behind them – Countrywide and New Century. One major difference between these two cases was that New Century had a bankruptcy examiner’s report while Countrywide did not.
Judge Denies Online Religious Group’s Bid for Church Status [WSJ]
A virtual “church” gets denied the whole “church” thing.
For the rich, ’tis better to give than wait [Reuters]
“With U.S. taxes almost guaranteed to rise next year, the rich have a rare opportunity to distribute some wealth and preserve their fortunes.
A weak economy has led to razor-thin interest rates and beaten-down valuations, which make giving less costly for and potentially more rewarding to heirs. Moreover, the U.S. government is widely expected to rein in a popular tax-avoidance scheme.
‘This is a golden era for shifting estates and giving assets away,’ said Bill Fleming, a financial planner for PricewaterhouseCoopers in Hartford, Connecticut. ‘If you have an estate plan, keep going: Uncle Sam soon will be back in your pocket.’ “
Wager 101: Students Bet on Their Grades [WSJ]
“The website attracted wagers by 600 students from two colleges last year, said Mr. Gelbart and co-founder Steven Wolf, graduates of Queens College. This month, the site expanded to let students on 36 campuses—including Harvard, Stanford and Brigham Young University—place bets. More than 1,000 new bettors have signed on.
Lisa Lapin, a Stanford University spokeswoman, said school officials were ‘appalled’ when they learned Stanford students could place bets on their grades, adding, ‘the concept of betting on academic performance is contrary to academic development.’
Lance Miller, a finance major at the University of Pennsylvania, says the criticism misses the mark. Mr. Miller, with a GPA of 3.6, won about $80 on two $40 bets that he would earn A’s in business courses.
‘We’re acing classes to make money—isn’t that what they call a win-win?’ said Mr. Miller, 20.”
Facebook’s Places Feature Lets Users Share Their Whereabouts With Friends [Bloomberg]
“Services that help Web users share their whereabouts and find nearby friends could generate as much as $4.1 billion in annual ad sales by 2015, according to Borrell Associates. The features can help marketers more easily target customers — say, by reaching shoppers when they’re close to making a purchase.”
This Fall, It’s Do or Die for Accounting Rule Convergence
“If we can’t get converged (on financial instruments), it would suggest the convergence effort is going to be challenged and questioned on a significant basis.”
~ FASB member Tom Linsmeier levels with everyone on the FASB’s big test in the convergence process this fall.
Accounting News Roundup: Senate Will Get to Financial Overhaul Post-July 4; Google to Cover Extra Health Benefit Costs for Gay Couples; Barry Wins a Stevie | 07.01.10
House Vote Sends Finance Overhaul to Senate [WSJ]
“The House agreed Wednesday to a sweeping rewrite of the nation’s financial regulations, moving the initiative one step closer to becoming law.
Focus now shifts to the Senate, where questions linger about whether Democrats have nailed down enough support from the handful of Republicans needed to overcome a likely filibuster. The Senate won’t take up the bill until after the July 4 recess, creating an awkward pause in which the bill’s opponents will have one last chance to derail it.”
Google to Add Pay to Cover a Tax for Same-Sex Benefits [NYT]
“On Thursday, Google is going to begin covering a cost that gay and lesbian employees must pay when their partners receive domestic partner health benefits, largely to compensate them for an extra tax that heterosexual married couples do not pay. The increase will be retroactive to the beginning of the year.
‘It’s a fairly cutting edge thing to do,’ said Todd A. Solomon, a partner in the employee benefits department of McDermott Will & Emery, a law firm in Chicago, and author of ‘Domestic Partner Benefits: An Employer’s Guide.’
Google is not the first company to make up for the extra tax. At least a few large employers already do. But benefits experts say Google’s move could inspire its Silicon Valley competitors to follow suit, because they compete for the same talent.”
Senate chairman starts probe of Transocean’s taxes [AP]
Senator Max Baucus (D-MT) would like to know whether Transocean’s move offshore was an exploitation of U.S. tax law, “The chairman of the Senate Finance Committee is launching an investigation into the tax practices of Transocean Ltd., owner of the Deepwater Horizon rig that exploded in the Gulf of Mexico, leading to the massive oil spill.”
Sadly, this will lead nowhere since exploitation ≠ illegal in this case. Deplorable? Yes. Tax malfeasance? No. Political pandering? Absolutely.
Deloitte CEO Barry Salzberg Wins Executive of the Year – Services at the 8th Annual American Business Awards [PR Newswire]
It’s a Stevie award! BS beat out Jeffrey Bezos, chairman, president and CEO, Amazon.com; Dominic Barton, managing director of McKinsey & Company; and Joseph Neubauer, chairman and CEO of ARAMARK for the Stevie.
In his own words, “I am very honored by this recognition, which truly is a testament to Deloitte’s progress and the industry-leading work of our more than 40,000 people in the United States. Although we have faced challenging economic times in the past few years, Deloitte’s diverse portfolio of quality services and investment in talent continue to drive our business and differentiate us in the marketplace. We are eager to approach the opportunities that await us and our clients in the economic upturn.”
GAAP and IFRS: Six Degrees of Separation [CFO]
That is, six major differences between the two sets of rules that will have to be ironed out. Namely: error correction, LIFO, reversal of impairments, PP&E valuation, component depreciation and development costs. After that, this convergence thing will be a breeze.
Accounting News Roundup: G-20 to ‘Stabilize’ Debt by 2016; Auditors May Be Forced into Whistleblower Role on Banks; Yes, Taxes Are Historically Low | 06.28.10
G-20 Agrees to Cut Debt [WSJ]
“The wealthiest of the Group of 20 countries said they would halve their government deficits by the year 2013 and ‘stabilize’ their debt loads by 2016, a signal to international markets and domestic political audiences they are taking seriously the need to wean themselves from stimulus spending.”
Once you catch your breath from laughing, the President also cited the tax code specifically and his threatening to put some (i.e. Congress) in a tight spot:
“They might have to make deeper cuts in deficits to comply with its pledge. A White House statement said that government debt in the fiscal year 15, would be at an “acceptable level.” President Obama said that next year he would present “very difficult choices” to the country in an effort to meet deficit goals.
The president cited his disappointment with the U.S. tax code. ‘Next year, when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits and debt step up, ’cause I’m calling their bluff,’ Mr. Obama said.”
Bank auditors eyed for whistleblower role [FT]
A paper from the UK’s Financial Services Authority puts forth the discussion of requiring auditors to work more closely with regulators on irregularities found during the bank’s audit engagement.
“Experts say bank executives are nervous about the prospect of increased bilateral discussions between regulators and auditors. Auditors have been fearful the paper could thrust the profession into a regulatory spotlight it has so far avoided.”
Koss Fraud: We didn’t bother to look at the endorsements on our own checks, but Grant Thornton should have! [Fraud Files Blog]
Fraud sage Tracy Coenen presents her latest view on the Koss fraud mish-mash and how Koss management has managed to make themselves “look like absolute morons.”
BP Loses $22 Billion in Legacy of Share Buybacks [Bloomberg]
“The sum represents the hole after the 52 percent plunge in BP shares since the Deepwater Horizon exploded and sank, resulting in the worst oil spill in U.S. history. BP bought back more than $37 billion of its stock in a bid to return money to investors between 2005 and 2008. Those shares are now worth $15 billion, excluding dividends.”
Martin Ginsburg, Noted Tax Lawyer and Husband of Justice Ginsburg, R.I.P. [ATL]
Mr Ginsburg was a tax law professor at Georgetown for many years and was known for his great sense of humor, as evidenced by his faculty bio, noted by our sister site, Above the Law:
Professor Ginsburg is co-author, with Jack S. Levin of Chicago, of Mergers, Acquisitions, and Buyouts, a semi-annually updated treatise which addresses tax and other aspects of this exciting subject. The portions of the treatise written by Professor Ginsburg are, he is certain, easily identified and quite superb.
Open Letter to the Securities and Exchange Commission Part 9: Overstock.com’s Excuses Simply Don’t Add Up [White Collar Fraud]
It appears Sam Antar has caught Overstock.com in another disclosure snafu but this time it isn’t really clear whether the company gave the wrong excuse, lied to the SEC or simply doesn’t know what they’re doing, “Overstock.com’s 2008 10-K report claimed that a reportable “gain contingency” existed as of November 7, 2008. However, the company contradicted itself and claimed to the SEC reviewers that reportable reportable ‘gain contingency’ did not exist on November 7, 2008.
If Overstock.com’s 10-K disclosure is true, the company’s explanation to the SEC Division of Corporation Finance can’t be true. Likewise, if Overstock.com’s explanation to the SEC Division of Corporation Finance is true, the company’s 2008 10-K disclosure can’t be true.”
Accounts bodies revise workplan [FT]
Convergence 2.0.
Today’s taxes aren’t too bad [Don’t Mess with Taxes/Kay Bell]
Kay Bell provides some perspective on tax rates over the last century. The following graphic should help clear up any confusion.
New Accounting Rules Ruffle the Leasing Market [NYT] “The two boards have come up with a new standard, which will be completed next year and enacted in 2013, that will require companies to book leases as assets and liabilities on their balance sheets. Currently, American and foreign companies list many leases as footnotes in their financial statements. As a result of the change, public companies will have to put some $1.3 trillion in leases on their balance sheets, according to estimates by the Se e Commission. Because many private companies also follow GAAP accounting, the number could be closer to $2 trillion, experts said.” Middle-Class Tax Boost Is Broached [WSJ] The Journal reports that the GOP has different ideas, including House Orange leader John Boehner is quoted in the Journal, “Mr. Hoyer’s speech brought a round of criticism from Republicans, who emphasize spending cuts instead, and oppose allowing any Bush tax cuts to expire. House GOP Leader John Boehner of Ohio said Mr. Hoyer was admitting ‘that he supports raising taxes on the middle class to pay for more government spending.’ “ Rep. Oompa Loompa obviously didn’t hear the part of the speech where Hoyer addressed the “cut spending” broken record, “The eagerness of so many to blast spending in the abstract without offering solutions that come close to measuring up to the size of the problem.” When the vehicle is moving the license plate would look like the ones we’re used to now, but when the vehicle stops for more than four seconds a digital ad or other message would flash. The license plate number would always be visible.” Madoff crony sprung [NYP] A grizzled-looking DiPascali refused to answer questions about the report in Monday’s Post that Madoff told fellow jailbirds that DiPascali knows the identity of three people the Ponzi king gave money to shortly before his arrest. A judge initially refused prosecutors’ requests that DiPascali be released so he could assist in their ongoing probe, but in February he won a $10 million bail package based on his extensive cooperation.” BP confirms Bob Dudley in key Gulf clean-up role [AP] Business Leader Slams ‘Hostile’ Policies on Jobs [WSJ] Mr. Seidenberg’s comments are particularly notable because he heads the Business Roundtable, a group encompassing the chief executives of the nation’s largest listed companies whose members have enjoyed frequent access to the president and his top aides. Its leaders have advised the White House on topics from economic recovery to health care to clean energy.” SEC Self-Funding Is A Mistake! [The Summa] What they don’t mention is that the budgetary review process provides an opportunity for Congressional oversight of the SEC. When the SEC is performing poorly, say due to the atrocious leadership of the Chairs (i.e., Cox and Schapiro), a Congressional budget cut is a natural and effective response. Of course SEC chairs want self-funding, it gives them a pass from oversight. Who wouldn’t want that?” “I am proud to say that so far my fellow board members and our staff, both FASB and IASB, have risen to the occasion. But I do fear potential burnout, as it’s not so easy to be running a marathon at sprint speed.” ~ Bob Herz, admitting that maybe these accounting wonks might be working too hard. Volcker upbeat on “reasonable” reform bill [Reuters] So from Big Paul’s POV, there is no option other than to get your shit together on this even though the two boards seem to be moving in the exact opposite direction. Oh, and could you do that ASAP? Reuters quoted him “What appeared to be two organizations converging … now looks like a collision. I hope they can come together by the end of the year.” One of his points was that internal auditors have been humiliated – because nobody has held them to blame to any degree for the collapse of the banking sector, the failures in corporate governance and risk management, and the tremendous loss in value of investors’ shareholdings all over the world. Richard pointed out that the Walker report (in the UK) on the causes of the banking crisis didn’t even mention internal audit. We are irrelevant. Mr Marks takes exception with this, saying that internal auditors do deserve some blame and that if the NYSE and others get around to issuing some requirements around the function of internal audit, the recognition will come with it. U.S. Faces ‘Severe’ AIG Losses, Says Panel [WSJ] Earlier in the week we heard the devastating news that the FASB and IASB’s convergence efforts, despite a good hustle, would not meet the G20’s deadline of June 2011. FASB Chairman Bob Herz indicated that this was a serious case of the Boards having bigger eyeshades than their double-entry stomachs could handle but he tried to squelch the disappointment by assuring everyone that the mission is not a failure and the Boards would “get most if not all of [the accounting standard proposals] done by the end of 2011.” Roberto and IASB Chair Sir David Tweedie, feeling bad about how the whole thing turned out, decided to send a letter to the G20, presumably to keep them from getting their panties in knot: It is expected that this action by the FASB and IASB will not negatively impact the Securities and Exchange Commission’s work plan, announced in February, to consider in 2011 whether and how to incorporate IFRS into the US financial system. We appreciate the support of the G20 for the development of a single set of high quality global accounting standards. The two boards remain committed to achieving that objective. We shall continue to provide timely updates regarding our progress. Ohhh, right. The SEC. What do they think about all this? Judging by Mary Schapiro’s attitude of “assuming completion of the convergence projects” as a precursor to IFRS, she’s totally cool with it, making her thoughts known in a statement yesterday: The boards believe that the modified plan will contribute to increased quality in the standards because it provides additional time for stakeholders to thoroughly consider the proposals and give both boards quality feedback. I view this as time that is well invested. Quality financial reporting standards established through an independent process are threshold criteria against which the Commission’s future consideration of the role of IFRS in the U.S. reporting system will be based. I foresee no reason that the adjustment to the targeted timeline for certain joint projects should impact the staff’s analyses under the Work Plan issued in February 2010, particularly when that adjustment is designed to enhance the quality of the standards. Indeed, focused efforts on those standards the boards consider highest priority for the improvement of U.S. GAAP and IFRS will facilitate the staff’s analyses. Accordingly, I am confident that we continue to be on schedule for a Commission determination in 2011 about whether to incorporate IFRS into the financial reporting system for U.S. issuers. In other words, no rush guys. Take it from Mary, this happens all the time. IASB and FASB update to G20 Leaders [IASB] “The primary result of the convergence project has been to take a set of perfectly mediocre accounting standards (U.S. GAAP) and messed them all up.” ~ Professor David Albrecht, who isn’t quite ready to dance on the grave of accounting convergence.
Accounting News Roundup: New Rule from FASB, IASB Will Bring Leases on Balance Sheet; California’s Latest Revenue Idea; Madoff CFO Released to House Arrest | 06.23.10
The convergence efforts by the FASB and the IASB have managed to produce a consensus on lease accounting and it has repercussions on both sides of the balance sheet.
Reaction to Steny Hoyer’s call in a speech for Congress to quit lying to themselves was not met with enthusiasm.
California could turn license plates into ad revenue space [Silicon Valley/San Jose Business Journal]
The latest out of the brain trust in Sacramento, “As California faces a $19 billion deficit, the Legislature is considering whether to allow license plates to become traveling ad spaces.
“Earlier yesterday, former Madoff CFO Frank DiPascali Jr. was released to house arrest.
Knock ’em dead!
“In comments marking one of the sharpest breaks between top executives and the Obama White House, [Verizon Communications CEO Ivan] Seidenberg used a speech at Washington’s Economic Club to unleash a list of policy grievances over taxes, trade and financial regulation.
“In support of SEC self-funding, SEC chairs always argue in public that they lack sufficient and consistent funding to enforce securities laws and regulations. As proof, they point out that Congress occasionally cuts back on SEC funding.
Accounting Convergence Will Claim Some Bodies
Accounting News Roundup: Volcker Says Convergence Is Looking Like a ‘Collision’; Internal Audit Battles Relevancy Question; AIG to Remain Ward of the State | 06.10.10
Former Fed Chair Paul Volcker took note of the FASB and IASB’s divergence on fair value and he’s not too thrilled about it, “[Volcker]…said that U.S. and international accounting standard setters must reach an agreement on how banks value the loans on their books.”
Is Internal Audit Irrelevant? [Norman Marks on Governance, Risk Management and Internal Audit]
The question about the relevancy of the Big 4’s audit business (at least for public companies) has been questioned but now the role of internal auditors is in question. Norman Marks cites a recent presentation at the IIA’s International Conference in Atlanta:
Even though the bailout of AIG probably prevented us from bartering over food in a barren wasteland with cars on fire everywhere, taxpayers ‘remain at risk for severe losses.’ A Congressional Oversight Panel also stated that the U.S. Government will continue to be a “significant shareholder through 2012.” The Beard is more optimistic however, saying “AIG, I believe, will repay.”
Mary Schapiro Isn’t Too Concerned About the Convergence Delay
Chairman Schapiro Statement on FASB-IASB Decision to Modify Timing of Certain Convergence Projects [SEC]
Accounting Rules Were Just Fine Until You Came Along
