September 20, 2020

Saturday Open Thread: The FASB Is All Show, No Substance

Welcome back to Saturday, folks. Once again, Saturday Open Thread is your opportunity to air any grievances, talk about your week, complain about failing the CPA exam, or berate Colin for the purple shirt he wore to the PCAOB open meeting on Wednesday. Let it all out, it'll help you head into Monday feeling slightly less suicidal and/or aggro.

Today's discussion topic comes courtesy the Grumpy Old Accountants, who apparently feel as though FASB should grow a pair when it comes to repo accounting:

The Lehman Brothers collapse led to some small, insignificant changes in the repo rules.  With the collapse of MF Global, the board thinks it desirable to consider some incremental but insignificant amendments.  As last year’s revision was impotent, we expect more of the same from any revision this year.

What the board should have done a decade or two ago was to focus on the economic substance of the transaction, and the substance of a repurchase agreement is that it is a secured borrowing.  Pure and simple.  Thus, all repurchase agreements should be accounted for as secured borrowings.

The FASB’s statement yesterday says more about it than it does repo accounting.  The board is incredibly slow and, with old age, is slowing down even further.  The board is reactive instead of proactive; apparently, it cannot think about an issue unless there is some type of financial crisis.  The board cannot think simple; instead, it seems to complexify whatever issue is at hand.  Finally, the board seems beholden to banks and has been for some time.  It appears to carry water for bankers, whether the topic is special purpose entities, derivatives, fair value accounting, or repurchase agreements.

Key take-aways I got from this: FASB can't get it up and likes busy work more than actual work. Oh, and it is not at all independent, possibly senile and definitely in need of a Come to Jesus meeting about its true purpose.

If any of you have suggestions for the FASB on how to promptly remove its regulatory head from its standard-setting ass, I'm sure they would love to hear your ideas.

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