We probably don’t need to remind you that today is Bob Herz’s last day at the FASB. It’s a sad day indeed for many that have been addressing their poignant comment letters to Roberto for the last eight years.
How Herz is celebrating his last day up in Norwalk isn’t immediately known but we’re sure it involves making crank calls to the American Bankers Association, Barney Frank’s face on a dartboard and plenty of cake.
Not so surprisingly, there’s not much mention of Bob’s last day out there except for cheeky article over at the Economist that informs us of precisely nothing new but manages to give Bob a backhanded compliment and take a major swipe at every single accountant on Earth:
Robert Herz[…]has had a more interesting career than any accountant deserves. He began his tenure as chairman of America’s Financial Accounting Standards Board (FASB) in 2002, dealing almost immediately with the fallout from the Enron and WorldCom scandals, which had been abetted by accountants. He was due to end it on October 1st, a sudden departure for undefined personal reasons, after a crisis also partly pinned on the profession.
Accountants “deserve” boring careers? Their choice of a profession automatically merits a long drab livelihood that involves choice of pen color, whether or not to upgrade the 10-key calculator on their desk and auditing Excel formulas? Forget about the rest of us for a minute; there are people who are ashamed to share humanity with Herz. It’s the man’s last day. Way harsh, Economist.
Beancounter there, done that [The Economist]
Just because Golden Boy is assuming Roberto’s seat on Friday, don’t think Herz is spending his final days as the FASB Chairman perusing the web for the latest D-list celebrity sex tape:
The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) today announced the completion of the first phase of their joint project to develop an improved conceptual framework for International Financial Reporting Standards (IFRSs) and US generally accepted accounting practices (GAAP).
The objective of the conceptual framework project is to create a sound foundation for future accounting standards that are principles-based, internally consistent and internationally converged. The new framework builds on existing IASB and FASB frameworks. The IASB has revised portions of its framework; while the FASB has issued ‘Concepts Statement 8’ to replace ‘Concepts Statements 1 and 2’.
This first phase of the conceptual framework deals with the objective and qualitative characteristics of financial reporting. As part of the consultation process, the IASB and FASB jointly published a discussion paper and exposure draft that resulted in more than 320 responses.
Along with the heavy lifting that comes with the FASB chairmanship, we imagine Herz is also doing some reflecting this week as his tenure comes to an end. You know, reading some of his favorite comment letters and drafting a farewell/thanks for all the good times email to Barney Frank and the ABA. Stuff like that.
IASB and US FASB Complete First Stage of Conceptual Framework [Business Wire]
Directly from the mouths of babes in Norwalk:
The Board of Trustees of the Financial Accounting Foundation (FAF) today announced the appointment of Russell G. Golden to the Financial Accounting Standards Board (FASB), effective October 1, 2010. Mr. Golden will fill the board member vacancy on the FASB resulting from the retirement of Robert H. Herz on September 30, 2010. Prior to his appointment, Mr. Golden served as technical director of the FASB.
Whether or not this is a pit stop for Russ on the way to the Chairmanship remains to be seen. Leslie Seidman is taking the “acting” role on October 1st and as the PCAOB has shown, that can last for awhile.
Mr. Golden’s initial term on the FASB will extend to June 30, 2012, the expiration date of the term left vacant by Mr. Herz’s retirement. As technical director of the FASB, Mr. Golden held primary responsibility for overseeing FASB staff work on all standards-setting projects, including major global and domestic projects and technical application and implementation of financial accounting and reporting standards. He also served as chair of the FASB’s Emerging Issues Task Force (EITF).
“We are delighted to appoint Russ to the FASB,” said FAF Chairman John Brennan. “The FASB will be served well by his depth of technical knowledge in accounting, intimate familiarity with the projects on the board’s technical agenda, and his proven track record for reaching out to constituents and evaluating all available input when approaching financial reporting issues, solutions and improvements.”
Mr. Golden assumed his role as technical director of the FASB in June of 2008, and before that served in various roles at the FASB as a member of the senior staff. Previous to his tenure at the FASB, Mr. Golden was a partner at Deloitte & Touche LLP in the National Office Accounting Services department. Mr. Golden earned his Bachelor’s degree from Washington State University. He is a licensed CPA in the states of Washington and Connecticut.
As announced by the FAF Trustees on August 24, 2010, the FASB will return to a seven-member structure. The Board of Trustees is engaged in processes to recruit and evaluate candidates for the two additional seats and to evaluate candidates for appointment as FASB Chairman. FASB member Leslie F. Seidman will assume the role of Acting Chairman as of October 1, 2010, as previously announced. More details about the search process are discussed in a Q&A with Mr. Brennan.
While Mr. Golden was expected to be appointed to the board, rumors are that he won’t be the next Chairman of the FASB. Some people are saying that it is most likely that Leslie Seidman will get the “acting” dropped from her title or it will be one of the two new members that have yet to be appointed.
Numbers Cop: FASB Staffer a Leading Candidate for Board [WSJ]
“The foundation that oversees the Financial Accounting Standards Board is considering Russell Golden, the board’s technical director, for the board post, these people said, although they cautioned that no final decision has been made. The chairman’s position would remain unfilled, they said, noting that the search process for a new chairman is at an early stage.
A spokesman for FASB declined to comment. Mr. Golden couldn’t be reached to comment.
The foundation has leaned toward an internal candidate because it would allow FASB to largely continue its work uninterrupted ts at the end of the month. Mr. Golden already is involved with the board’s many projects.”
U.S. Companies Added 67,000 Jobs in August [Bloomberg]
“Companies in the U.S. added more jobs than forecast in August, easing concern the economy was falling back into recession.
Private payrolls that exclude government agencies climbed 67,000, after a revised 107,000 increase in July that was more than initially estimated, Labor Department figures in Washington showed today. The median estimate of economists surveyed by Bloomberg News called for a gain of 40,000. Overall employment fell 54,000 for a second month and the unemployment rate rose to 9.6 percent as more people entered the labor force.”
Tax-fraud conviction voided because judge didn’t stop trial to let defendant go to son’s deathbed [Los Angeles Times]
“A federal judge’s refusal to halt a businessman’s tax-fraud trial so he could be at his son’s deathbed was cause to overturn the businessman’s conviction, an appeals court has ruled.
U.S. District Judge Dale S. Fischer also prejudiced the case against Garth Kloehn by failing to inform the jury that he was absent for the final day of trial because his son had died, the appeals panel said. Fischer told the jury that Kloehn “has a right not to be here,” possibly leaving jurors with the impression he was showing a lack of respect for the court, the judges said.
Kloehn was the sole defense witness in his 2005 trial in downtown Los Angeles on charges of failing to report $1.2 million in income. He left the courtroom after testifying to catch a flight to Las Vegas to see his cancer-stricken son, leaving no one to rebut the prosecution’s final testimony. Kloehn arrived at the Las Vegas hospital one hour before 45-year-old Kevin Kloehn died.”
Transparency and the I.R.S. [NYT]
Someone – namely Christopher Bergin, the publisher of Tax Analysts – isn’t convinced that the IRS is serious about transparency. So much so, he wrote the Times and they seemed impressed so they published his letter.
Europe greenlights US audit inspections [Accountancy Age]
“S audit regulators will be able to inspect European firms after the European Commission cleared the way for access to confidential papers, in a move which could allow Lehman Brothers investigators to follow up leads in London.
The European Commission said it will now share internal working documents with audit watchdogs in the US and Australia. The move breaks an impasse which had emerged between US and EU authorities over the sharing of confidential internal audit inspection papers, retained by regulators when they inspect audit firms.”
Better accounting for small businesses [WaPo]
Another letter to the editor, this time pointing out that small businesses shouldn’t be complaining about issuing 1099s to vendors if they have any semblance of an accounting system.
Accountant arrested for scalping U.S. Open tickets had 339 spots to sell worth $10,000: Prosecutors [NYDN]
For some reason, Marvin Schaffer had 28 parking permits for Jets games.
Tom Boniface Joins PricewaterhouseCoopers LLP in New York as Co-Leader of Indirect Tax Practice [PR Newswire]
“PricewaterhouseCoopers (PwC) announced today that Tom Boniface has joined the firm as co-leader of PwC’s Indirect Tax practice, focusing on value added taxes (VAT) and based in the New York office.
Boniface is well versed in the various indirect tax regimes around the world, such as European VAT, Canadian and Australian GST, Brazilian ICMS and Japanese consumption tax. He brings over 15 years of experience serving U.S.-headquartered Fortune 100 and middle-market companies.
Boniface, who most recently led the consumption practice at another major accounting firm, has a B.S. in Accounting from the State University of New York at Oswego. He is a Certified Public Accountant in New York State.”
Tax Profs for the Ground Zero Mosque [TaxProf Blog]
“While the First Amendment is directed at government interference with speech, press and religion, it exists to guard against the danger that an angry and fearful majority will undermine those cherished rights. Thus even in the absence of government interference, it is incumbent upon us to stand with those seeking to exercise those rights in the face of heated public opposition. Unfortunately, with the notable exception of Mayor Michael Bloomberg, there have been few profiles in courage on this issue”
~ Sorry about the downtime yesterday. Our best people are on it like ConEd.
Deloitte to be world’s biggest accountant as partners sweep up £590m [Telegraph]
“According to Mr Connolly, when Deloitte publishes its global results in October the firm is set to reveal it has overtaken PriceWaterhouseCoopers to become the biggest of the “Big Four” accountancy houses globally.
However, Mr Connolly, who is set to retire in 2011, predicted the current financial year could prove even more successful despite describing future growth in the wider economy as ‘low and slow.’ ‘We have alr in the first quarter of this year, so I expect we shall return to double-digit growth. The M&A market has started to get much busier and our tax business is growing well again. Changes in regulation also mean good business for us.’ ”
Investors Gain New Clout [WSJ]
“In a decision years in the making, the SEC voted 3-2 in favor of the “proxy access” rule, which requires companies to include the names of all board nominees, even those not backed by the company, directly on the standard corporate ballots distributed before shareholder annual meetings. To win the right to nominate, an investor or group of investors must own at least 3% of a company’s stock and have held the shares for a minimum of three years.
Currently, shareholders who want to oust board members must foot the bill for mailing separate ballots, as well as wage a separate campaign to woo shareholder support. Both are too costly and time-consuming for most. Now, the targeted companies will essentially be footing the bill for the dissidents, including them in the official proxy materials. The new rule will be in place in time for the 2011 annual meeting season next spring.”
Celgene names new chief financial officer [Reuters]
Jacqualyn Fouse will replace David Gryska effective Sept. 27
Herz Resigns As FASB Chair [The Summa]
Professor David Albrecht’s take on Roberto Herz’s decision to step down.
3Par Accepts Dell’s Increased Takeover Offer [Bloomberg]
“Dell Inc. said 3Par Inc. has accepted its increased offer of $24.30 per share in cash, or about $1.6 billion, net of 3Par’s cash.”
Dodging the Ax: How to Avoid Layoffs [FINS]
“As professionals working in financial-services witness the ax drop around their companies, many are living in fear that they could be included in the next round of layoffs. However, there are measures you can take right away to help safeguard your position and make you seem indispensable to management.”
Stanford Used Skimmed $1.6 Billion For Loans To Start-Ups, Witness Says [Bloomberg]
“The $1.6 billion that indicted financier R. Allen Stanford is accused of skimming from the funds of his investors was actually loaned by his Antiguan bank to start-up entities and other businesses he controlled, a fraud examiner testified.
Forensic accountant Alan Westheimer testified before a U.S. judge in Houston today that Stanford Financial Group Cos. comptroller Mark Kuhrt and chief accountant Gilbert Lopez told him they believed the borrowing should have been publicly disclosed.
‘The funds were being passed through as inter-company loans to the entities that were the recipients of the shareholder loans,’ Westheimer said. ‘Within a short period, usually six months, Mr. Stanford would assume those loans and the recipient companies transferred those balances to their underlying capital.’ ”
Yesterday we learned that FASB Chair Bob Herz would be ending his spectacular 8 year run as the head of our favorite accounting standards setting agency.
What we have not learned is who will be replacing him permanently when he escapes next month. In the interest of helping FASB come up with a qualified replacement, we have a few suggestions. Do we need to submit these in comment letter form or can someone just email over for us?
Patrick Byrne Listen, we know there’s something just not right about the guy and it’s entirely possible that he lacks the actual paper qualifications required of the FASB chair. But to his credit, he can do wonders with financial reporting, especially when it comes to using magical fantasy models very similar to FASB’s own mark-to-Disneyland initiatives. He’d be great for coming up with all sorts of helpful guidance (except when it comes to internal control, he might have to contract out to the IASB on that one) and if the IASB decides to get too lippy, Byrne can simply send Judd Bagley after Tweedie’s ass to “straighten him out,” ifyoufeelme.
Willie Nelson Okay, so we’re pretty sure you have to take a drug test before you’re allowed to run the FASB but assuming Willie can get his hands on some goldenseal, we think we have a winner here. He’s laid back enough to handle hard ribbings by Barney Frank in the event of another bank accounting debacle and who knows, we could put off convergence another 15 years if we can send Nelson over to the IASB with some goodies. They’ll be too busy watching Chapelle’s Show and hunting down Doritos to start messing with the sanctity of GAAP. Win.
The hot chick who got fired from PwC Let’s be real about it, the FASB chairman job used to be an esteemed position but now that we’re trudging ever-forward towards convergence (or, rather, total IASB domination), we don’t actually need anyone with more than half a brain in that position. So why not offer hot chick a job? Qualifications include: standing there looking pretty, keeping your trap shut and ignoring Tweedie’s midnight sexting.
If you have a suggestion, why not let us know? We’ll be sure to include it as an aside in our next comment letter. Whoever they get, can we please PLEASE make sure they slightly more photogenic than our buddy Bob? Seriously, we’re going to miss you, Herz, but man did you make us all look bad.
Herz Leaving Marks Boon for Banks [WSJ]
“A new front has opened up in the war over mark-to-market accounting. Suddenly banks find themselves with an unexpected advantage in the fight over how they should value their vast holdings of financial instruments.
T rprise announcement Tuesday of the departure of Robert Herz as chairman of the Financial Accounting Standards Board. This will give banks an opportunity to push for a successor who is more friendly to their views on the mark-to-market question, as well as the overall idea that accounting should be for more than just investors.”
Former Chief Accounting Officer for Beazer Homes USA, Inc. Indicted on 11 Criminal Counts [FBI]
Michael Rand didn’t have a very good day yesterday.
Block ramped up federal lobbying efforts in second quarter, report says [AP]
H&RB lobbied their asses off from April to June spending $500k talking the ears off at the IRS, Treasury and SEC.
American Apparel Works To File Late 10-Q Before Nov 15 [Dow Jones]
The NYSE has put Dov & Co. on notice that they best get their act together if they don’t want to be sent slumming with the pink sheets. The company is promising to pull things together and if it weren’t for Deloitte quitting, everything would be a-okay.
Fact Checking Minority Leader Boehner’s Claims on “Small Business” and the “Bush” Tax Cuts [Tax Foundation]
In case you didn’t hear, John Boehner suggested that the President fire his entire economic team. Boehner is of the opinion that letting the tax cuts expire will hurt small businesses, citing the Joint Tax Committee. Tax Foundation takes exception with this, saying that the Ohio Congressman and House Minority Leader is misrepresenting the findings of the JTC:
“First off, the businesses that JCT is referring to are not necessarily ‘small.’ Saying the word ‘small business’ sounds good to the electorate because it brings up an image of a mom and pop store on Main Street America. But plenty of large businesses, as defined by net income or gross receipts, file their taxes under the individual income tax as opposed to the corporate income tax. Merely because a business is paying individual income taxes as opposed to corporate taxes does not mean it is ‘small.’ ”
Statement From Chairman Schapiro on Financial Accounting Foundation Developments [SEC]
“I commend the Financial Accounting Foundation for its ongoing efforts to evaluate and improve the effectiveness and efficiency of the structure and operation of the Financial Accounting Standards Board by increasing the size of the Board. The Foundation has determined that this revised structure will facilitate the continuing efforts of the FASB to work with the International Accounting Standards Board on their important convergence work plan. In addition, this should enhance the ability of the FASB to address issues facing the U.S. capital markets and the needs of investors.
“I also would like to commend FASB Chairman Robert Herz for his more than eight years of service. During his tenure, Chairman Herz has served as an effective investor advocate to improve the quality of financial reporting standards around the world. I welcome the appointment of Leslie Seidman as Acting Chairman. During this interim period, I look forward to working with Acting Chairman Leslie Seidman and the FASB as they continue their important work.”
Twenty something day-trader nailed with $172M bill in back taxes, asks ‘What’s the IRS?’ [NYDN]
How does a barely surviving Spaniard end up owing over $170 million to the IRS? For starters, he really doesn’t owe the Service the money. The problem arose because he didn’t file a tax return for one year that he spent day trading. The Service concluded that he made $500 million.
China Traffic Jam Could Last Weeks [WSJ]
Today, be thankful for your commute. No matter how bad it was, at least the drive/ride ended.
Eight “successful” years is a helluva run, Bob. Not sure if he’s upstaging Tweedie’s exit next year or what. They’re buds and all. So now the speculation should probably start as to who will replace Roberto. Leslie Seidman will be running things as the “Acting” Chair and if you take the PCAOB’s as example, that “Acting” Chair can sit tight for awhile. Dan Goelzer has been “acting” as the Chair for over at the Board for over a year now.
So the important question is, who’s next to fly this ship? Taking shit from bank lobbies enerally being known as being the biggest double-entry nerd in a gray suit this side of the pond is not an easy gig. We’d suggest a deputy accountant but there’s probably some silly qualifications that she will disqualify her. Does Tim Flynn put down the bag at KPMG? Do we finally get serious and get a knight to run this thing? Suggestions welcome.
NORWALK, Conn.–(BUSINESS WIRE)–The Board of Trustees of the Financial Accounting Foundation (FAF) today announced that the Financial Accounting Standards Board (FASB) will grow from five to seven members. The FASB previously operated with seven board members from its inception in 1973 until 2008. In addition, Chairman Robert Herz has decided to retire from the FASB after more than eight years leading the standard-setting board. FASB member Leslie Seidman has been appointed Acting Chairman, effective October 1, 2010.
“Returning the Board to the seven-member structure will enhance the FASB’s investment in the convergence agenda with the International Accounting Standards Board (IASB), while addressing the unprecedented challenges facing the American capital markets in the months and years ahead”
“Returning the Board to the seven-member structure will enhance the FASB’s investment in the convergence agenda with the International Accounting Standards Board (IASB), while addressing the unprecedented challenges facing the American capital markets in the months and years ahead,” said FAF Chairman Jack Brennan. “The FAF Trustees believe this is the right investment in the standard-setting process at the right time that will enable it to accomplish the many duties that are so critical to the organization’s constituents.” The transition to a seven-member board will occur as soon as the process to recruit and evaluate candidates is complete, which is expected in early 2011.
Mr. Brennan added: “On behalf of the Board of Trustees and, especially, all investors and others affected by the FASB’s work, I want to offer my sincere thanks to Bob Herz for his strong leadership of the FASB in, arguably, the most challenging period in its history. We greatly appreciate his service and congratulate him for a job well done. Moving forward, we are very fortunate to have a highly respected, experienced leader like Leslie Seidman to assume the duties of Acting Chairman.”
Robert Herz, Chairman of the FASB, said: “My more than eight years as Chairman of the FASB have been among the most professionally challenging and personally satisfying of my career. There are hundreds of people I need to thank for their strong support and invaluable contributions to our standard-setting activities. First and foremost, I offer my deep appreciation to my fellow board members and our dedicated and talented staff. I’m very proud of our accomplishments, and I’m confident the board will continue to successfully meet the challenges ahead.”
Ms. Seidman has been a FASB member since July 2003. She has also served the FASB in various staff roles. Prior to joining the board, Ms. Seidman managed her own firm, providing consulting services to major corporations, accounting firms and other concerns, and previously served as vice president of accounting policy at J.P. Morgan & Company. Ms. Seidman started her career as an auditor in the New York office of Arthur Young & Company (now Ernst & Young LLP) and is a certified public accountant.
Last month we told you about how the American Bankers Association encouraged anyone that disagreed with the FASB’s proposed fair value rule to write a letter telling Herz & Co. how much the proposal su ind enough to provide a template for said “FASB Blows” correspondence so the anti-fair value crowd could get the gist of what needed to be said.
The ABA did warn, however, that the FASB hates, loathes, DETESTS form letters, so in order to make a valid point, it was advisable to not simple slap your name in the appropriate place but to articular your own special brand of hatred for the FASB.
As you may recall, many ABA groupies did not heed this warning, which no doubt resulted in Bob Herz and the rest of the Norwalk team using the letters to stoke their mid-summer weenie roast bonfire.
As disappointed as the ABA must have been with the lack of originality, we were sent this shining example that has been making the rounds at the Big 4 (or so we’re told). Our guess is that this is more of what the ABA had in mind:
Bravo, James C. Blaine. Bravo. You are most definitely into the brevity thing. You have, presumably, made the ABA proud. But wait, there is a pro-fair value letter worthy of these pages.
Granted, it was written back in May but Brian Cowell is no less passionate than Mr Blaine:
Nicely done, both of you. Everyone take note.
Back in April when he was testifying before the House Financial Services Committee, FASB Chairman Bob Herz couldn’t really say one way or another what he thought about the repurchase accounting that Lehman Brothers was using.
At the time, Herz just said that FASB would work diligently with the SEC (no porn allowed), that Lehman skirted the disclosure rules and that they were going to get to the bottom of this, come hell or Barney Frank’s shrewd disposition.
In a recent meeting with his fellow double-entry wizards in Norwalk, Herz said that he was opening up ‘a very targeted scope project’ that will get to the bottom of this pile:
“Once we’re made aware that people are trying to structure around specific provisions in the accounting literature, it makes you think about whether those provisions need to be looked at,” he told the board. “We’ve asked the staff to take a look at that and come back with some recommendations in the pretty near term,” he said.
FASB Plans New Rules Around Repurchase Agreements [Compliance Week]
Banks hate the FASB. This is understood. They’re especially bent out of shape these days because the Board recently put out its latest fair value proposal that requires them to carry their loans at fair value. Bob Herz knew that this was going to cause hella-belly aching although he may not have predicted the virtual assault that was coming.
Banking lobbyists have launched an e- mail and Web campaign to mobilize investors against a proposed expansion of fair-value accounting rules that may force banks such as Citigroup Inc. and Wells Fargo & Co. to write down billions of dollars of assets.
The American Bankers Association opposes the Financial Accounting Standards Board’s plan to apply fair-value rules to all financial instruments, including loans, rather than just to securities. The group says the rule could make strong banks appear undercapitalized.
The association’s website, noting that FASB’s stated mission is to serve investors, provides a sample letter for people writing to the board and suggests they focus on why the proposal isn’t “useful for investors.”
As you can see, the banks are bringing out the big guns, although this not unfamiliar territory for the FASB. Lynn Turner, a Senior Advisor and Managing Director at LECG and former Chief Accountant SEC wrote in an email to GC, “This campaign is very similar to the efforts of the technology companies campaign against the FASB in 1993-95 to prevent rules that would have required those companies to expense the value of their stock options, something that ultimately led to investor losses and problems in the markets.”
The FASB prevailed in that particular battle but the ABA is wise to their ways, encouraging everyone to resist going through the motions on this one:
The association’s Web page, titled “Guidance for Investors Regarding FASB’s Mark-to-Market Proposal,” includes a sample letter to the board “for educational purposes only.” The group urges investors to “write your own letter — the FASB does not appreciate ‘form’ letters, and often discounts them in their analyses.” Those who comment should “let FASB know that you are an investor,” the ABA says.
U.S. Banks Recruit Investors to Kill FASB Fair-Value Proposal [Bloomberg BusinessWeek]
“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.
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.
Yes, that’s your shocking headline of the day. Despite the retripling of efforts via videoconferencing and other fancy-schmancy technology, some Frenchman losing patience, and having a Knight spearheading 50% of the efforts, they will utlimately fall short of the June ’11 goal.
The Norwalk, Connecticut-based FASB and the London-based International Accounting Standards Board expect to announce changes to their convergence work plan in the next week or so that would delay the completion date by about six months and allow for greater public comment on the boards’ proposals, FASB Chairman Robert Herz said in an interview with Reuters.
“We’ve been working on a revised work plan with the IASB,” Herz said.
“We’d all like to see the work done as expeditiously as possible, but we don’t want to sacrifice proper due process.”
Herz said that to issue final standards by June 2011, the boards would have to release about 10 proposals in the next two months and rush through the public comment process.
It was nice of the FASB and IASB to say, “June? No problemo,” to the G20 BSDs but many organizations, including Financial Executives International, and even Chief Accountant Kroeker said that the overachieving might lead to some shoddy accounting standards.
Mr Herz is still optimistic about finishing up before 2012 telling Reuters that the two Boards will “get most if not all of [the accounting standard proposals] done by the end of 2011,” which is probably enough time for IFRS to be adopted by everyone. But then the world is on a strict deadline to end in 2012, so why are we bothering with this again?
Proposed Overhaul of Accounting Standards Contains Mark-to-Market Rule [NYT]
The FASB has rolled out MTM 2.0 and while the usual suspects have already started belly-aching, Bob Herz insisted that “The financial crisis reinforced the need for better accounting in this area.”
The new rule will require loans and loan-related instruments to be valued at their market value immediately, thus accelerating any losses that might occur. Losses will either be booked as a hit to earnings or as a reduction in the value of the asset. The Times quotes Jack T. Ciesielski of Accounting Analyst Observer, who reassures, “It will messier to read, but if you know what you are doing you can figure it out.”
The comment period (which should yield some interesting thoughts) will run through the end of September, after which the FASB will hold roundtables discussing the rule and then make any final changes. Institutions with greater than $1 billion in assets will be required to adopt the rule in 2013 while those with less than $1 billion will have until 2017.
The Property Tax: Unsung Hero [TaxVox]
States have their property tax revenues to thank for their budgets not being in an even bigger mess than they already are, according to TaxVox. “[P]roperty tax revenues have yet to fall both because the levy tends to be backward-looking (it takes a while for assessed values to catch up with reality on both the upside and the downside) and because local governments can raise rates. The strength of the property tax was the main driver of the small positive growth in overall state and local taxes for the fourth quarter of 2009.”
If states are lucky, by the time property tax rates adjust to the reduced home values, sales and income tax revenue may be on their way to recovery. However, it’s unlikely that tax revenues will return to their previous levels which means governments may have to continue (or maybe start?) to – God forbid – cut spending.
“I Didn’t Know What ‘$’ Means” Fails as Tax Defense [TaxProf Blog]
Who let this guy out of the lab? “I am unaware of the meaning of this symbol.”
Yahoo CFO Sees Annual Revenue Growth Of 7%-10% From 2011-2013 [WSJ]
Contrary to what some might believe, Yahoo is still in business and doing quite well, thankyouverymuch. CFO Tim Morse expects things to brighten up with revenue increasing 7-10% from 2011-2013, due mostly to increased advertising business. Yahoo’s partnership with Microsoft and Zynga (they make Farmville) are seen as key to the search engine competing with Google.
Survey finds tax departments more concerned with getting it right than aggressive tax planning [GT Press Release]
Grant Thornton’s latest CFO survey finds that they are more concerned with getting their taxes right than with paying less. Obviously the latter is a goal but considering the regulatory environment (i.e. Democrats are running things), it’s not the priority, despite what those people running for re-election might tell you.
FEI Implores FASB, IASB to Slow Down [Compliance Week]
Financial Executives International is concerned that the FASB and IASB have gotten a little too ambitious in their convergence efforts and has written a letter to the Boards’ respective Chairmen that basically says, “Easy, tiger.”
Everyone knows that those knowitalls at the G-20 were insisting the accounting rule mavens to make convergence happen by next summer but FEI is trying to take pragmatic approach to this:
Arnold Hanish, chairman of FEI’s Committee on Corporate Reporting, said in his letter to the two boards the group is concerned about the “unprecedented volume as well as the complexity of proposed standards” that the two boards are developing. The committee fears the vast scope and aggressive timeline for the proposals will not allow adequate analysis of how the rules will work, which will lead to implementation problems and amendments further down the line.
In other words, this isn’t quantum mechanics, but it’s not Fisher Price either. Mr Hanish did his best to remind Bob Herz and Sir David Tweedie just how overambitious this little project is:
Our member companies are extremely concerned with the 10+ Exposure Drafts (EDs) that are in final stages and will be released for public comment through the third quarter of 2010. During any single period in time in its 38-year history, the FASB has had no more than 3 or 4 significant EDs out for public comment.
FEI doesn’t seem convinced that this unprecedented overachieving by Herz and Tweeds is going to result in the “one set of high quality standards.” They would prefer that hte Boards get this right the first time so they don’t have to slap the proverbial duct tape all over the efforts later.
Cabbies, Accountants Look to Chip-Fat Fuel on Cost, Environment [Bloomberg]
PricewaterhouseCoopers’ London office is trying to do its best for the environment by using local chip-fat converted into biodiesel to supplement its energy needs:
PwC is seeking local sources for 45,000 liters of biodiesel to meet one quarter of its monthly office fuel needs, said Jon Barnes, head of building and facilities services at the firm.
“I’m trying to locally source used chip fat from restaurants,” he said. “It’s a pretty pointless exercise of using biofuel if it’s been all round the world on a ship.”
Sounds like a bang-up idea but P. Dubs is always looking for an angle, “Having a renewable source for some of PwC’s office’s energy needs could help the company sell its services to clients wanting to do the same.”
House Holds Hearing Today on Tax and Internet Gambling [TaxProf Blog]
The House Ways & Means Committee is holding a hearing today to kick around the possibility of legalizing Internet gambling here in the US of A (and taxing it, of course). It kicks off at 9:30 am ET and with any luck, you’ll be legally losing your mortgage payments for the 2010 football season.
It’s not surprising that FASB’s Bob Herz was called to submit comment on the House Financial Services Committee’s hearings on Lehman – more specifically, Public Policy Issues Raised by the Report of the Lehman Bankruptcy Examiner – and it’s even less surprising that Herz stated that the FASB will be ready when the SEC is to alter repo accounting rules should this be, you know, a big deal going forward.
As many of you already know, the FASB has a history of taking a reactive stance to accounting issues during the financial crisis (case in point: mark to market) and repo accounting is no exception. Sort of like the SEC cracking down on Madoff-esque Ponzi schemes after Madoff, it defeats the purpose as financial criminals very rarely repeat techniques that have already been uncovered and prosecuted. But oh well, showing up late to the party is still showing up and proves FASB is at least paying attention.
Herz’s testimony reinforces FASB’s position as standards setter, not regulator. Working with the SEC will allow the regulators to put together a case for accounting standards that could address repo accounting should the SEC discover it is widespread among financial firms but for now, FASB will be sitting back and waiting to see what the SEC comes up with.
As it turns out, FASB isn’t nearly as reactive as it appears on the surface: plenty of guidance already exists for handling these transactions and perhaps had Ernst & Young been looking hard enough, they would have easily found something amiss.
When developing the guidance for determining whether a company maintains effective control over transferred assets, the FASB noted repo transactions have attributes of both sales and secured borrowings. On one hand, having a forward purchase contract is not the same as owning the asset. On the other hand, the contemporaneous transfer and repurchase commitment entered into in a repo transaction raises questions about whether control actually has been relinquished. To differentiate between the two, the FASB developed criteria for determining whether a company maintains effective control over securities transferred in a repo transaction.
Control? Is that was this about?
Regardless, FASB is prepared to offer even more guidance on the matter should current guidance not be sufficient to make sense of future contracts that could be used in a fraudulent manner. Of course, the financial criminals have likely already discovered a new, innovative way to hide liabilities or stash nasties off-sheet but instead of looking for those, the SEC will be working closely with FASB in the future to prevent another Lehman. History always repeats itself but, sadly, financial crimes rarely do. It appears our friends at FASB never got that memo.
We’ll be posting on a lighter schedule today. Hopefully many of you are enjoying a long weekend.
• Dell says several former staff may face SEC action [Reuters]
Some former Dell employees are facing possible SEC actions related to the company’s accounting. The Commission started its inquiry back in 2005 and Dell disclosed that the U.S. Attorney for the Southern District of New York had subpoenaed documents shortly after in 2006. This all led to the Accounting Code of Conduct that the Company implemented last fall. The company stated that it believes ‘monetary penalties’ will be part of the settlement but otherwise they’re keeping a lid on it.
• FASB Chairman Robert H. Herz and IASB Chairman Sir David Tweedie to Discuss Global Accounting Issues at The George Washington University [FASB]
Herz and Tweeds will be at G Dubs on Wednesday, April 7th kicking around global accounting issues. “Greater Global Transparency in Financial Reporting: Lighting the Path for Investors” starts at 6 pm and is free and open to the public, so you best get there early before the groupies overrun the joint.
• NASBA Takes Back (Some) Passing CPA Exam Scores for March [JDA]
In what could amount to the worst April Fool’s joke in history, Adrienne is reporting over at JDA that NASBA is taking back some of the scores for March after extending the test dates in the third month:
[F]rom a reliable source within the Big 87654 that test-takers outside of the blizzard-affected areas have actually gotten their scores taken away and thrown out. Yes, that means all of you who put it off until the very last minute and rescheduled for the March extension are pretty much screwed unless you also got snowed in on top of it. Yes, those of you who paid for and passed the exam in March.
Huh. We’re checking into this. We’ll get back to you if we learn more.
For the love of everything that is good and holy, would someone like to be the FASB Chairman? Or the Chief Accountant of the SEC?
We realize that they’re both thankless jobs but we need people in there that are going to make some things happen.
After Jim Kroeker said this:
“[T]he boards have agreed that the projects that they’re working on are areas that need improvement, not just under U.S. GAAP but under IFRS, then I think convergence efforts should continue or would continue without an SEC finalization of the roadmap,”
Bob Herz is now saying this:
“[T]he ball is mostly with the [SEC] at this point” … Herz noted the SEC has yet to rule on the “roadmap” for U.S. compliance with IFRS it proposed a year ago.
So, let’s get this straight: JK is said, “You go first.” Now Bob Herz is saying, “No, you go first.” Does anyone want to introduce these two clowns? Are they waiting for knighthood before they move on this?
We suggest that somebody toss Mary Schapiro in there to A) complete the trilogy of stooges and B) so she can bonk their heads together. That might get them motivated.
Herz: U.S. Convergence Ball Is in SEC’s Court [CFO]
Sounds like Bob Herz and Sir David Tweedie are phoning it in with regards to fair value rules.
Herz and Tweedie and their respective accounting wonks met in Norwalk, CT on Monday and they’re all but admitting that there’s no chance that they’ll get on the same page:
At a joint meeting in Norwalk, Connecticut on Monday, members of the London-based International Accounting Standards Board (IASB) and U.S. Financial Accounting Standards Board (FASB) sparred over whether fair value, or “mark-to-market,” accounting rules should be expanded to a broader array of financial assets, such as loans and deposits.
In a move opposed by the banking industry, the FASB has proposed that all financial instruments be valued at market levels, while the IASB has proposed to have those assets valued at “amortized cost,” which would mostly provide information about expected cash flows.
“If FASB and IASB can’t agree on mixed model or full fair value model … the next best thing is something to move between the two,” Sir David Tweedie, chairman of the IASB, said on Monday…”By the end of 2010… if we can’t get it together, we should be appreciably together,” Tweedie said.
Plan B is already in full effect! Instead of one fair value rule, the two standard setters will provide a “presentation for fair value for more financial assets on corporate balance sheets so that investors would be able to quickly reconcile numbers in U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).”
Some board members are worried that this approach may be too confusing, however. Confusing financial statements? That’s only a problem for average investors. No biggie.
Oh, well. We know 2010 is coming up fast and those politicians get impatient when the bank lobbyists are threatening to cut off the money. Thanks for trying guys. You did your best.
Accounting boards try to reconcile fair value views [Reuters/Emily Chasan]
Editor’s note: Adrienne Gonzalez is founder and managing editor of Jr Deputy Accountant as well as regular contributor to leading financial/investment sites like Seeking Alpha and GoldmanSachs666. By day, she teaches unlicensed accountants to pass the CPA exam, though what she does in her copious amounts of freetime in the evening is really none of your business. Follow her adventures in Fedbashing and CPA-wrangling on Twitter @adrigonzo but please don’t show up unannounced at her San Francisco office as she’s got a mean streak. Her favorite FASB is 166.
I can’t take it anymore. I’m serious, this is BS. It has been nothing but up and down, agony and ecstasy for as far back as I can remember on fair value and I want off this ride.
More agony, after the jump
The Financial Accounting Standards Board’s updated fair-value rules will require companies to fully understand fair-value and mark-to-market concepts and extensively document their analysis of illiquid assets, as this article notes. The FASB gave companies some new latitude in applying fair-value principles but stood firmly behind the importance of fair value in preparing meaningful financial statements.
Stop, please. This is getting to be abusive.
Remember when you whispered in our ear, “Certainly, to those who say that accounting should better reflect true economic substance, fair value, rather than historical cost, would generally seem to be the better measure” in 2003, Bob Herz? We totally fell for it. Who wouldn’t? Swept off of our feet and still hurting from Enron, we needed a rebound and fair value totally worked.
I truly wish you and IASB the best of luck in whatever you two decide to do with your miserable little lives.
While FASB may be pushing back in the other direction and mulling the use of fair value and mark-to-mark with bank loans in addition to assets like mortgage-backed securities, the IASB seems to be tacking in an alternative direction. That could be leading them on the road to divergence, not convergence.
And I’m defriending you on Facebook, Bob. At least you know your new girlfriend does fair value.