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Sir David Tweedie Confirms Your Accounting Firm Mafia Suspicions

As you probably remember, head knight of the double-entry accounting round table, Sir David Tweedie, is retiring in a few months to be replaced by this guy. Until then, however, the wily Scotsman will be running the show and he’s still pitching IFRS as if the life of the financial reporting universe depended on it. Just like Bob Herz, he’s in this thing until the very end.

CFO has a brief Q&A with SDT and despite the USA’s pussyfooting around the issue, he manages to rush to our defense at the suggestion of haters that the IASB should give us the “throw the bums out” treatment:

Some critics grumble that if the United States does not adopt IFRS, it should be ousted from the IASB and the board of trustees. What’s your opinion?

I get quite angry at some of the comments we get insisting that the United States be ousted. People say that America would have to come around because the U.S. share of global-market capitalization is falling all the time. The complaint is, “We’re not having [the United States] tell us what to do if they don’t use international standards.” I can understand that, and you can have international standards without the United States. But you can’t have global standards without the United States. So there is more work to be done on that issue.

So in other words, suck it world! You can keep your international standards. We’ve got a knighted Scotsman who even said you’ll make due without us. Call it whatever you like, just don’t call it “global” without us. Because you can’t spell “global” without “A”… which stands for…er….”America.” BASTARDS.

[BREATHE] Never mind that. The most interesting bit is that Tweeds appears to blow the lid of the Big 4 omertá:

What’s been your experience with professional judgment? Many U.S. practitioners say a heavy reliance on judgment won’t work in America’s litigious environment.

As a technical partner at KPMG, I was always being asked to evaluate situations that were outside of issued guidance. It’s the same in the United States — you get questions you’ve never thought about before, and there’s nothing in the standards addressing it. So you kick it around with the client, the client partners, and other senior partners in the firm. You come up with a position.

[My approach was to] ring up Deloitte, for example, and say, “Have you had one of these [situations]?” There is sort of a technical-partner mafia that gets together and says, “Yeah, we had one of these.” So, in a way, the profession fixes the problems.

So whether this is happening under the nose of the brass or with their full and unmitigated support can’t be determined, although we won’t be surprised if the old man ends up “retiring” early.

Tweedie Takes a Bow [CFO]

What’s the Deal with Groupon’s Adjusted CSOI?

According to Bloomberg, Groupon’s operating income and other accounting trickery habits are being studied by the U.S. Securities and Exchange Commission, part of a routine review of the site’s IPO. Nothing out of the ordinary there.

But Groupon seems pretty transparent about the unreliability of their methodology. I guess this is to say “don’t rely on this information, we’re kind of making some of these numbers up” so investors can’t say they weren’t warned.

Check out this June 2, 2011 SEC filing:

Our use of Adjusted CSOI has limitations as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• Adjusted CSOI does not reflect the significant cash investments that we currently are making to acquire new subscribers;

• Adjusted CSOI does not reflect the potentially dilutive impact of issuing equity-based compensation to our management team and employees or in connection with acquisitions;

• Adjusted CSOI does not reflect any interest expense or the cash requirements necessary to service interest or principal payments on any indebtedness that we may incur;

• Adjusted CSOI does not reflect any foreign exchange gains and losses;

• Adjusted CSOI does not reflect any tax payments that we might make, which would represent a reduction in cash available to us;

• Adjusted CSOI does not reflect changes in, or cash requirements for, our working capital needs; and

• other companies, including companies in our industry, may calculate Adjusted CSOI differently or may use other financial measures to evaluate their profitability, which reduces the usefulness of it as a comparative measure.

Because of these limitations, Adjusted CSOI should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. When evaluating our performance, you should consider Adjusted CSOI alongside other financial performance measures, including various cash flow metrics, net loss and our other GAAP results.

Better yet, AQPQ explains the math behind ACSOI:

Groupon acknowledges that it is losing money when profits and losses are measured in accordance with Generally Accepted Accounting Principles (GAAP). The firm claims, however, that its profits and losses are more meaningfully measured by a metric they call Adjusted Consolidated Segment Operating Income (ACSOI).

How does this number differ from profits and losses that are measured in accordance with GAAP? ACSOI apparently includes all of the revenues, but only some of the expenses, that are recognized by GAAP. By excluding certain significant expenses, Groupon manages to convert its losses into profits.

So what is the SEC going to find? Accounting methods already confessed to by the perps? Big deal.