How can we best screw this up?

Without Blaming Lehman Directly, FASB Solicits Comments on a Repo Accounting Do-Over

Filed under: more mess to directly blame on the fall of Lehman Brothers and Uncle Ernie’s epic failure

FASB is being awfully kind to those who played a large part in that whole total financial meltdown issue by avoiding actual name-dropping in their latest exposure draft but we don’t need names to know who they are talking about. *coughLehmancough* Here’s the note from FASB yesterday:

The Financial Accounting Standards Board (FASB) issued an Exposure Draft (ED) today to solicit input from stakeholders on its proposal to improve the accounting for repurchase agreements (repos) and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The FASB requests comments on this ED by January 15, 2011.

“During the global economic crisis, concerns were expressed about a narrow aspect of existing guidance for determining whether a repo should be accounted for as a sale or as a secured borrowing,” notes FASB Acting Chairman Leslie F. Seidman. “The proposals contained in this Exposure Draft seek to address these concerns by simplifying this guidance.”

You hear that? You’ve got until January 15th to draw up your fantastic comment letters (please don’t disappoint us, we haven’t seen a good comment letter since North Carolina State Employees’ Credit Union President James Blaine said of mark-to-market: “Theoretically arrogant; in practice insane; financially negligent and reckless. Other than that, I have no concerns.”) on this new repo accounting proposal.

Once again, FASB wants the input of the worker grunts to find out A) what the plan is and B) how they should go about implementing it.

Seeing as how comment letters are a hallmark of our fantastically cooperative profession maybe FASB is going about this the wrong way. After all, it would be the investors who relied on incorrect information on Lehman’s financial condition based on creative repo accounting (mind you, “creative” and “fraudulent” are not the same thing) who are most impacted by current rules and any changes, not the accountants putting together the financial statements. Surely they would know better than to rely on their own financial information.

If you are unfamiliar with the joys of repo accounting FASB has offered a quick primer:

In a typical repo transaction, an entity transfers financial assets to a counterparty in exchange for cash with an agreement for the counterparty to return the same or equivalent financial assets for a fixed price in the future. Topic 860, Transfers and Servicing, prescribes when an entity may or may not recognize a sale upon the transfer of financial assets subject to repo agreements. That determination is based, in part, on whether the entity has maintained effective control over the transferred financial assets.

The amendments in this proposed Update are intended to simplify the accounting for these transactions by removing from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets, as well as implementation guidance related to that criterion.

Clarification is always nice, I guess, but paint me skeptical, I don’t see additional guidance doing much for closing the giant gaping loophole that Lehman drove a truck through on its way right off the cliff.

Accenture Is Giving Tiger the Arthur Andersen Treatment

shredder_tiger2.jpgYou’ve got to hand it to Accenture, if you’re not the ‘metaphor of high performance’ any more (i.e. a married man with two kids screwing everything that moves), they will make Enron audit workpapers out of you.
After the hammer came down on Sunday, the marketing crew — who spent the last six years making T. Dubs’ mug the mug of Accenture — has some work to do:

By Monday afternoon, Accenture staffers had swept through the company’s New York office and removed any visible Tiger posters. The next day, marketing and communications employees around the world were asked to turn in any remaining Tiger-emblazoned posters and other materials.

Considering the fact that Accenture is one of the remaining derivatives of Arthur Andersen, destroying all this stuff should be a piece of cake (shredder sure but we’re guessing they’ve got an incinerator chute). The best part for them is, they aren’t obstructing justice, they’re maintaining their sterling (?) reputation.
Maybe easier said than done since they spent “$50 million on advertising in the United States last year, and Mr. Woods appeared in 83 percent of the company’s ads.”
They really just need to get someone (anyone!) else in there ASAP to make us sorta forget (but not really) that T Dubs was shilling for them for six years.
Accenture, as if Tiger Woods Were Never There [NYT]

Here’s a Good Example of How Not to Sue a Big 4 Firm

Thumbnail image for morans.jpgWere you at all concerned that you would never hear another story about a lawsuit related to the AOL/Time Warner merger from 2001? A merger described by BusinessWeek as possibly being the “worst of the worst.”
AOL’s revenue recognition practices for booking online ad revenue led to restatements of their financial results from 2000 to 2002. This led to hundreds of shareholder lawsuits, most of which were consolidated into a class action suit. All of the suits have been settled or dismissed.
E&Y, who audited the AOL portion of this little gem, has now had the final lawsuit against the them dismissed. Back in 2003, AOL shareholder Dominic Amarosa decided that he was going to file suit on his own rather join the class action. Problem was, he didn’t file suit on time and failed to connect his losses to statements that were made by E&Y. Those both sound kind of important.
On top of that, Judge Colleen McMahon didn’t really care for the plaintiff or his attorney Christopher Gray, calling Amarosa a ‘vexatious litigant pursuing clearly frivolous claims’ and Gray’s tactics, ‘shenanigans.’ Judge McMahon also indicated that she was considering sanctions against Gray for said shenanigans.
So if you’re looking for a blueprint on how to completely screw the pooch on a lawsuit against a Big 4 firm, this is probably a good place to start.
Lawsuit over Time Warner-AOL merger dismissed [Reuters]