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October 3, 2023

Accounting News Roundup: Barclays May Consider Its Auditor Options; An Invertebrate Regulator; Big Gulps! | 03.12.13

Barclays Considers Auditor Change After a Century With PwC [Bloomberg]
Barclays Plc (BARC), the U.K.’s second- largest bank by value, said it will consider tendering its audit contract held for 117 years by PricewaterhouseCoopers LLP. Barclays is considering “how and when a tender process might be implemented, particularly given the transitional provisions suggested by the Financial Reporting Council,” it said in its annual report today. “A recommended course of action will be proposed to the board during 2013.

Realities Behind Prosecuting Big Banks [DealBook]
Are banks too big to jail? If there was any doubt about the answer to that question, Eric H. Holder Jr., the nation’s attorney general, last week blurted out what we’ve all known to be true but few inside the Obama administration have said aloud: Yes, they are. “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute — if we do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy,” Mr. Holder told the Senate Judiciary Committee. “I think that is a function of the fact that some of these institutions have become too large.”

Europe’s Accounting Rules Are Destroying Its Banks [Bloomberg]
Let’s hope that the European Commission will scrutinize the IFRS standards closely — it won’t be easy. The International Accounting Standards Board, which drew up the rules, doesn’t appear to accept the gravity of the problem. At a meeting last year, I explained to three senior board officials why profits calculated under the current rules aren’t safe for distribution. The officials acknowledged the problem, saying that banks should maintain two profit calculations, one for reporting to shareholders, and the other — not following IFRS rules — to determine distributions to shareholders. Surely this is false accounting?

Illinois Is Accused of Fraud by S.E.C. [NYT]
For the second time in history, federal regulators have accused an American state of securities fraud, finding that Illinois misled investors about the condition of its public pension system from 2005 to 2009. In announcing a settlement with the state on Monday, the Securities and Exchange Commission accused Illinois of claiming that it had been properly funding public workers’ retirement plans when it had not. In particular, it cited the period from 2005 to 2009, when Illinois also issued $2.2 billion in bonds. The growing hole in the state pension system put increasing pressure on Illinois’ own finances during that time, raising the risk that at some point the state would not be able to pay for everything, and retirees and bond buyers would be competing for the same limited money. The risk grew greater every year, the S.E.C. said, but investors could not see it by looking at Illinois’ disclosures.

And the SEC Wonders Why Investors Think It's Spineless [Bloomberg]
The Securities and Exchange Commission accused the state of Illinois of securities fraud as part of a settlement disclosed today. The case is an SEC self-parody at its finest. The SEC didn't sue any individuals, as if the so-called fraud occurred by itself. The state of Illinois neither admitted nor denied the agency's findings, meaning the allegations remain unproven. The only penalty was an SEC order prohibiting the state from engaging in the same sorts of infractions again — like breaking the law was somehow permissible before. The SEC only rarely sues repeat offenders for violating such "obey-the-law" directives, so these have little if any practical meaning.

Hong Kong woman jailed for 10 years for laundering $877 mln [Reuters]

A Hong Kong public housing tenant was jailed for 10 years on Tuesday for laundering more than HK$6.8 billion ($877 million) through nine banks, just two months after a Chinese man was imprisoned in the Asian financial centre's biggest such case. Lam Mei-ling, 61, laundered the money between 2002 and 2005 with about 39,500 bank transfers, the Court of First Instance heard. The defendant said she made the transfers on behalf of an unidentified woman, from her home town in Dongguan in southern China's Guangdong province near Hong Kong, who used to babysit her daughter before becoming a factory owner.

Showdown in Kansas: Realtors vs. Governor [Martin Sullivan]
The Kansas tax reform fight is of national importance. Brownback's efforts are a bellwether for federal tax reform. If the governor can't cut the mortgage interest deduction in a heavily Republican state, it does not bode well for bold federal tax reform plans that are depending on trimming the federal mortgage interest deduction to pay for lower rates. I believe my views are consistent with those of most economists when I express my hope that Brownback succeeds. Although the mortgage interest deduction is the tax break politicians and the public are most protective of, it is probably the least defensible on policy grounds. The housing lobby says the deduction promotes homeownership and that is good for neighborhoods and families. Of all the convoluted excuses for tax breaks, this is one of the weakest I've ever come across. 

FASB Accounting Codification Updated in Print [AT]
Schapiro Is Nominated to G.E. Board [DealBook]
She must've done something right!
Judge Cans Soda Ban [WSJ]
Mayor Michael Bloomberg was dealt a stinging blow on Monday when a state Supreme Court Judge quashed his plan to ban the sale of large sugary drinks in the city's restaurants and other venues. At a late afternoon news conference, Mr. Bloomberg and the city's top lawyer, Michael Cardozo, said they believed the judge erred in his ruling and vowed to appeal. The decision was both lauded and criticized by city officials and others. "It would be irresponsible not to try to do everything we can to save lives," said Mr. Bloomberg, who earlier in the day called for jurisdictions across the nation to follow suit.

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