Merging the iconic New York Stock Exchange with Germany’s Deutsche Boerse AG will force European companies to switch to using U.S. accounting rules which have superior disclosures, Mayor Michael Bloomberg said on Friday.” This will force a common set of accounting standards on the world; the American disclosures are better,” Bloomberg said on his weekly WOR radio show, though he admitted U.S. rules did not prevent Bernard Madoff from swindling billions of dollars through a Ponzi scheme. [Reuters]
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Sir David Tweedie’s Patience Is Wearing Thin
He may be on his way out the door but still IASB chair David “that’s Sir David to you” Tweedie is still sick of all our heel-dragging on IFRS in the U.S. He hasn’t gone so far as to say we’ll be left in the capital market dust if we don’t adopt tomorrow but he’s clearly fed up with our procrastination.
If they put off a commitment to international financial reporting standards beyond 2011, U.S. accounting rulemakers and standard-setters would impose “unnecessary costs and risks on U.S. companies,” Sir David Tweedie, chairman of the International Accounting Standards Board, said Wednesday at a U.S. Chamber of Commerce gathering on the future of financial reporting.
The major risks are competitive ones, said Tweedie. U.S.-based multinationals already must fill numerous sets of accounting books. Many must file their financials under U.S. generally accepted accounting principles even as they report on the activities of their overseas subsidiaries under IFRS or the standards crafted by individual nations, he pointed out. At the same time, their foreign competitors can use IFRS for all purposes, even for filing with the Securities and Exchange Commission, he added.
As is, the transition to IFRS is estimated to cost American companies $35 million per year (remember 3 years of restatements will be required). We’re not sure if he has access to different estimates that somehow make qualified IFRS monkey restatements more expensive in 2012 and beyond than they would be by the end of this year but it seems painfully clear that he means business.
I’m not sure if he missed the memo but we don’t seem as enthusiastic about convergence as we did when we delayed the release of a roadmap in 2008. Three years later, we don’t appear to be any more prepared for the transition than we were then and still have three (or make that four) more good years to drag our heels according to recent statements by the SEC.
How much clearer does Tweeds need it? We’re just not that into your standards.
From the Sounds of It, Small Companies Better Learn to Love IFRS
SEC Chief Accountant James Kroeker is "hopeful" that the SEC can figure something out re: […]
What’s on Incoming IASB Chairman Hans Hoogervorst’s Plate?
Your next IASB chairman, Hans Hoogervorst, already has a few things on his to do list (right after scratching Sir David Tweedie’s name off the door), one of which involves restoring investor confidence by redoing last year’s bank stress tests in Europe since it seems they were not really credible, “One reason for scepticism was that sovereign bonds on the banking book were deemed to retain their full value, despite the fact that many were trading at steep discounts in the market,” he said. “The fact that some Irish banks that had passed the test later turned out to be insolvent only served to reinforce the doubts in the market.”
Doubts? That’s a kind way to put it.
Speaking at the two-day European Commission financial reporting and auditing conference, Hoogervorst also wanted to make sure everyone is clear on who rules the IASB. Despite appearances that rules are made by a handful of influential Europeans who like to play with accounting regs, he insisted the IASB is a multi-national group in which everyone gets a say. Or rather, he insisted that he’ll be trying to make sure the IASB is perceived as such, “It’s very important that we develop a governance structure that is more inclusive. At all costs we should avoid the perception that IFRS is dominated by a small group of nations,” he said. He did not seem to clarify if he was more worried about the actual structure of the IASB or just the appearance, nor did he mention how many U.S. delegates will have at the IASB’S table if we were to stop dragging our feet and just adopt already.
While auditors are taking a lot of heat for failing to catch just how bad off European banks were, H-squared doesn’t seem to feel they deserve so much criticism as they were simply following the rules. “How critical will auditors be when they see that regulators consider that severely discounted securities carry no risk?” he asked, obviously rhetorically.
Also in attendance at the conference, Federal Reserve senior associate director and chief accountant Arthur Lindo, who is hopeful that we here on this side of the pond will “move diligently towards some form of IFRS in the near future.” What Lindo did not say was whether or not the Fed would also adopt these rules or continue to use their freakish hybrid of GAAP and government accounting that they make up each and every year. Perhaps convergence will mean throwing in some IFRS into their 300+ page financial accounting manual.
Looks like Hans is going to have his hands full for the foreseeable future. Veel geluk met dat!
Accounting chief calls for more credible bank test [Reuters]