[T]he tediously-reported proclamation of real convergence commitment has never been more than a smokescreen behind which the divergent interests of the Americans and the Europeans have knocked heads to the point of insensibility. (For which, recall the continued fudging of the SEC as to whether, if ever, that agency is even going to confirm a date certain on which to decide if to weigh in or not […].) Why no-one has called the question on this endless charade reflects the two-level fantasy in the dialog: the IASB and the FASB both pretend to believe in the desirability of fully-converged accounting standards, and the community of financial statement issuers and users pretend to believe them. [Re:Balance]
Tag: FASB
IASB Chairman: We Don’t Issue Low-Quality Accounting Standards
Rule makers concluded this week that “we all could benefit from a few more months to develop these standards, some of which really go to the core issues of many companies,” said Leslie Seidman, chairman of FASB, in a podcast issued Thursday. Sir David Tweedie, chairman of the IASB, said rule makers still intend to finish their convergence work by year’s end. The delay, he said in the podcast, will “enable us to check whether our conclusions will last the test of time. … We would never release a standard before it is ready and ultimately it must be a high-quality standard or you just can’t issue it.” [WSJ]
Lynn Turner Doesn’t Let Accountants, SEC, FASB Off the Hook for Their Part in Financial Crisis
Today’s testimony before the subcommittee of Securities, Insurance and Investment will be focused on the how the accounting industry can help prevent the next financial crisis and will feature many prominent figures. The first panel will feature James Doty, Chairman of the PCAOB, Leslie Seidman, Chairwoman of the FASB and James Kroeker the Chief Accountant of the SEC.
The second panel will include Anton Valukas of Jenner & Block and the bankruptcy examiner of Lehman Brothers, Cynthia Fornelli of the Center for Audit Quality, Thomas Quaadman of the U.S. Chamber of Commerce and Lynn Turner, the former Chief Accountant of the SEC. Throughout the statement Mr Turner points to various defects within the accounting profession infrastructure. This includes the profession itself, “auditors helped contribute to a crisis in confidence” the efforts of the accounting rule-making body, “Clearly the FASB has failed to develop quality and timely standards,” and the hapless SEC, who “[lacks] the tools for the job.”
Mr. Turner’s written statement appears in full after the jump.
EU Official Gives IASB a Paternal Driving Lecture on Accounting Standards
Did this Jeroen Hooijer character forget that he’s addressing a knight?
[Hooijer] said world leaders have extended the deadline for convergence from June to the end of this year and likened the IASB to a sports car driving at 160 kilometres an hour to the south of France. “We would like to slow down to 120. We don’t want to stop it. If you drive to the south of France and you only arrive half an hour later, the risk of an accident is 70 percent lower,” Hooijer said.
A Mountain of Hate Mail Gets FASB to Backtrack on Fair Value
If the drinks at Davos weren’t already free, we’re pretty sure Stephen Schwarzman would be buying.
From the Journal’s man on the accounting beat, Michael Rapoport:
Accounting rule makers took a key step Tuesday to reverse a proposal that would have required banks to value their loans based on the ups and downs of the market. The Financial Accounting Standards Board agreed that companies could continue to carry a variety of financial assets and liabilities at amortized cost, an adjusted version of their original cost, as they do now. That would reverse a proposal the board introduced last May that would have required bank loans and other financial assets to be carried at “fair value,” based on market prices.
What happened, you ask? What caused the FASB to fold like a cheap lawn chair? Remember all those nastygrams that were sent to Bob Herz? It sounds like the FASB took those personally:
FASB indicated the overwhelmingly negative reaction to its proposal, from companies and investors alike, played a big role in prompting the board to change its mind. The board received more than 2,800 comment letters on its fair-value proposal, most of them opposed to the move, and heard more opposition at a series of public roundtables before it began reconsideration of its proposal for fair-value changes.
So the bankers win this round. Oh, wait…they win every round.
Leslie Seidman Is No Longer Acting Chairman of the FASB
She’s officially the boss for reals.
The Board of Trustees of the Financial Accounting Foundation (FAF) today named Leslie F. Seidman chairman of the Financial Accounting Standards Board (FASB), effective immediately. Ms. Seidman has served as the acting FASB chairman since the retirement of Robert H. Herz on September 30, 2010.
“Our Board of Trustees is thrilled that Leslie Seidman has agreed to accept the position as Chairman of the FASB. She brings both unparalleled standard-setting experience and outstanding leadership skills to her new role,” said FAF Chairman John J. Brennan. “As the FASB continues its efforts to address the many significant accounting and financial reporting issues both here in the U.S. and globally, Leslie’s depth of experience with international and domestic financial reporting issues will enhance our progress toward meeting the needs of all of our varied constituents. On behalf of the FAF Trustees, we are delighted that she will be leading the FASB’s efforts to tackle these many challenges for the betterment of capital markets participants both here and abroad.”
How does Les feel about being the new punching bag of the anti-IFRS contingent, House Financial Services Committee, the American Bankers Association and countless letters and emails of ridicule? Pretty good, actch:
“I am honored to be leading the FASB at such a pivotal time in our history,” said Ms. Seidman. “The FASB remains committed to developing standards that will provide investors and other capital providers with decision-useful information. We are at a crucial point in our convergence program, and my fellow Board members and I are working in close partnership with the IASB to improve the comparability of financial information around the world. We want our standards to enhance communication and confidence in financial reports, and we will continue to seek new ways to keep our stakeholders informed and engaged in the standard-setting process.”
It’s just accounting rules after all, how bad could it be?
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.
If You Never Write Another FASB Comment Letter In Your Life…
… please answer this with your best explanation of your position. I’ll go on record saying I am expecting comment letters stuffed with expletives, paranoia, panic and conjecture and personally can’t wait to read some of them.
“Quirky” representatives of the Profession, you know who you are. I want long rambling anti-IFRS manifestos dammit, don’t disappoint me.
The Financial Accounting Standards Board (FASB or Board) is issuing this Discussion Paper to solicit information from stakeholders about the time and effort that will be involved in adapting to several anticipated new accounting and reporting standards and when those standards should become effective. The FASB will use that information to develop an implementation plan for those new standards that helps stakeholders manage the pace and cost of change. The FASB requests comments on this Discussion Paper by January 31, 2011.
The question FASB would like answered is “how the fuck are we going to pay for this convergence thing?” and they’re asking the profession to come up with solutions. I imagine some pockets of the profession couldn’t care less how much it will cost as they are only thinking about learning the new rules because, well, someone’s got to do it, right?
Don’t misunderstand it, they would also like to know if they should transition all at once or gradually, if effective dates should be different for various entities and just how many billable hours might be lost to figuring all of this out. So basically they need you guys to get on this ASAP because they’ve had several years to do it and are still lost.
“Our joint workplan supporting the Memorandum of Understanding with the IASB identifies targeted completion dates for various projects, but does not address when the standards would be effective,” notes Acting FASB Chairman Leslie F. Seidman. “We issued this Discussion Paper to gather the information we need to create a realistic, cost-effective plan for transitioning to the new standards.”
In other words: can you guys ballpark the timeframe and how we’re going to pay for it? I’d rather see the profession spend its quality billable time writing comment letters on its opinion of the transition and/or FASB’s handling of it. I think you fringe accountants know what to do, so I thank you in advance.
Accounting News Roundup: America’s Fiscal Conundrum; FASB Attempting to Price Convergence; Rent and Healthcare Are Both Too Damn High | 10.20.10
Pledging Our Way to Fiscal Disaster [Tax Vox]
Three-quarters of Americans believe that entitlement programs such as Medicare and Social Security “will create major economic problems” over the next 25 years. But two-thirds are opposed to addressing these challenges by reducing benefits, and 56 percent are against raising taxes.
And congressional candidates, who read the polls, are scrambling to pander to the free-lunch beliefs of their respective bases. As a result, they are locking themselves into opposing both reductions in future benefits and tax increases.
NFIB calls for action on Bush tax cuts [On the Money]
“Increasing the individual rates will mean that business owners have less money for business investment and job creation,” the NFIB stated. “One study found that a 5 percent increase in individual tax rates decreases business investment by 10 percent.”
Democratic leaders have repeatedly promised that rate cuts for all but the top two brackets will be extended into next year, allowing most businesses to avoid a tax increase. The NFIB states their plan will still hit small businesses.
FASB Seeking Input on the Costs of Convergence [JofA]
FASB issued a discussion paper to gather input from stakeholders about the time and effort that will be involved in adapting to several anticipated new accounting and reporting standards and when those standards, which are part of the FASB and International Accounting Standards Board (IASB) convergence projects, should be effective. The board said it will use the input it receives to develop an implementation plan that helps companies and other stakeholders manage both the pace and cost of change.
“We issued this discussion paper to gather the information we need to create a realistic, cost-effective plan for transitioning to the new standards,” Acting FASB Chairman Leslie F. Seidman said in a press release.
Paul V. Stahlin Elected Chairman of the AICPA [PR Newswire]
Stahlin said the United States is emerging from a period of economic turmoil that has “driven demand for new business practices, new regulations, new oversight and new solutions,” in his inaugural speech, titled “Seize the Future.” He said CPAs have been finding solutions for more than 100 years.
“We as CPAs have the unique ability to make sense of a constantly changing complex world,” Stahlin said. “Employers, our clients and our country turn to us to make sense of the most complex developments in business and regulation. We best understand how a business ticks.”
Bob Evans Financial Chief To Depart At Year’s End [Dow Jones]
Tod Spornhauer wants to do something different.
Yahoo 3Q profit doubles, revenue still lackluster [AP]
Bartz and CFO Tim Morse are still in process of turning this thing around.
J&J CFO: Healthcare Spending Growth Is Decelerating [Dow Jones]
Certain medical expenses are simply too damn high.
Jimmy McMillan: Rent is Too Damn High! [CBS]
Speaking of, in case you missed it yesterday (or Monday night):
Accounting News Roundup: Big Names Oppose Proposed Washington Tax; American Apparel Names Acting President; Oregon Gubernatorial Candidate Donates Home and Gets Burned | 10.08.10
SEC Accuses CHiPs Actor, Others Of Securities Fraud [Dow Jones]
“In complaints made public on Thursday, the SEC alleges that the actor, Larry Wilcox, and more than a dozen other penny stock promoters engaged in a series of kickback scheme volume and price of microcap stocks and illegally generate stock sales.
Wilcox, who starred as Officer Jon Baker on the long-running television show “CHiPs”, lives in West Hills, Calif., and is president and chief executive of The UC Hub Group, according to an SEC complaint filed in U.S. District Court for the Southern District of Florida.”
Microsoft, Boeing, Amazon Line Up Against New Washington Tax [Janet Novack/Forbes]
“The Washington State fight over whether to impose a new income tax on well-to-do residents heated up Wednesday, as the group opposing the tax released a list of employers that have joined the anti-tax cause. Companies on the list include Microsoft, Boeing, Amazon, Weyerhaeuser and Safeco Insurance.
The tax, which will appear as Initiative 1098 on the state’s November ballot, would impose a 5% tax on income of more than $400,000 per couple and a 9% levy on income exceeding $1 million per couple.”
Rep. Levin: Fate of Bush tax cuts unknown [On the Money/The Hill]
This does not sound good: “The Senate is expected to move first on the issue, but Levin said even that was not certain.
‘It’s preferable that the Senate act first because we’ve seen that if they can’t act first they won’t act second because the Republicans block it and don’t provide the 60 votes,; he said, adding, ‘I think we’ll have to wait and see.’ “
American Apparel names Tom Casey as acting president [Reuters]
Tom Casey just left the terminal case known as Blockbuster in August.
SBA Loans Jump, Despite Unsteady Year [WSJ]
“Small-business lending still hasn’t bounced back to pre-recession levels. But despite a rocky year, the number of loans backed by the Small Business Administration jumped about 30% in 2010.
The agency, which ended its fiscal year Sept. 30, says it approved $16.84 billion, or 54,826 small business loans, in the past 12 months. That’s up from fiscal 2009, when the SBA backed about $13.03 billion during the depths of the credit crunch. In 2007, the agency backed about $20.61 billion.”
Oregon Gubernatorial Race Roiled by Candidate’s Charitable Deduction for Donation of Home to Fire Department [TaxProf Blog]
You try and do something nice…
FASB Advances EITF Proposals on Goodwill, M&A [A&A Update/Compliance Week]
“The Financial Accounting Standards Board is proposing new updates to the Accounting Standards Codification around goodwill write-downs, business combinations, and revenue recognition for health care entities based on recommendations from its Emerging Issues Task Force.
In the proposal titled Intangibles – Goodwill and Other (Topic 350): How the Carrying Amount of a Reporting Unit Should Be Calculated When Performing Step 1 of the Goodwill Impairment Test, FASB and the EITF want to settle on one starting point for all companies to follow in deciding if goodwill needs to be written down.”
U.A.E. Drops Threat to Suspend BlackBerry [NYT]
Your vacation is back on.
Accounting News Roundup: KPMG’s Hiring Spree in Europe; Herz Gets Nostalgic; Stalemate on Estate Tax Could Benefit States | 10.05.10
KPMG joins Big Four hiring spree [FT]
The FT gives us the scoop on the Radio Station hiring bonanza in Europe (if you’re experienced go here), “KPMG is hiring 8,000 new staff across Europe over the next three years, signalling a recovery in the corporate services industry.
The hiring includes 3,000 staff in Britain, even though the UK government has pledged to cut its consultancy bill amid growing public unease over the billions of pounds spent on professional fees in the past decade.
The recruitment drive will take KPMG’s workforce from 30,0 Europe, excluding France and Italy, and from 11,000 to 14,000 in the UK. KPMG also has ambitious hiring plans in France and Italy.
The corporate services industry had been hit by the global downturn, with the Big Four accountancy firms – KPMG, Ernst & Young, PwC and Deloitte – criticised for their role in signing off financial statements stuffed with assets that plummeted in value during the crisis.”
After Eight Years at FASB, Herz Looks Back [CFO]
Q&A with the man himself. Can you guess which accounting pronouncement he’s a big fan of?
Two Accounting Firms To Pay $1.7 Million To Settle CFTC Charges [Dow Jones]
“The charges stemmed from audits of Sentinel that were conducted between 2004 and 2006. The firms, McGladrey & Pullen LLP and Altschuler, Melvoin & Glasser LLP, agreed to pay $400,000 and $800,000, respectively, in restitution to Sentinel’s customers who suffered losses as a result of the Illinois-based futures commission merchant’s bankruptcy.
They were also required to pay civil monetary penalties of $150,000 and $350, 000, respectively, according to an order that was filed Monday. McGladrey & Pullen acquired assets related to Altschuler, Melvoin & Glasser’s audit practice in 2006.”
Ex-SocGen Trader Kerviel Convicted of Trading Fraud [WSJ]
” Paris court sentenced former Société Générale trader Jérôme Kerviel to three years in prison for his role in one of the biggest trading scandals in history, ordering him to repay a whopping €4.9 billion ($6.69 billion) loss suffered by the French bank.”
Investor Feedback Summary May Foretell FASB Retreat [Compliance Week]
“The Financial Accounting Standards Board may be sending up a smoke signal with an unusual missive describing how investors aren’t entirely in love with the board’s proposed new rules on financial instruments.
The board published a nine-page description of its interaction with investors regarding the FASB’s controversial proposal to call for more fair value in accounting for financial instruments. It opens with a reminder that FASB writes accounting rules to assure that financial statements produce information useful to investors, then explains how investors are reacting to the proposal when the board conducts face-to-face meetings with investors.”
State Estate Taxes: Windfall Gold in Expiring Tax Cuts [TaxVox]
States make out pret-tay well if Congress bumbles the estate tax.
U.S. hits AmEx with antitrust suit [WaPo]
“The Justice Department announced Tuesday that it had filed an antitrust suit against American Express for preventing retailers from offering customers discounts for using rival credit cards with lower processing fees.
Federal officials added that they had reached a proposed agreement with Visa and MasterCard over the matter.
The issue of ‘swipe fees’ has long been a thorn in the side of the retailing industry, which complained that it has little power to inform customers of the differences in card costs. In its complaint, the Justice Department estimated that the fees cost merchants $35 billion each year – resulting in higher prices for shoppers.”
LinkedIn and PwC Launch Breakthrough Career Mapping Tool for College Students [PR Newswire]
“LinkedIn, the world’s largest professional network with more than 80 million members globally, today launches Career Explorer in collaboration with PwC US, one of the largest employers of college graduates in the United States. The new LinkedIn Career Explorer tool provides current college students with unique, data-driven insights to help them build their careers.”
A Shift at the Top of Twitter [DealBook]
“Evan Williams, the co-founder and chief executive of Twitter, is stepping down to lead product strategy at the company, Twitter announced on Monday. Dick Costolo, the chief operating officer, will succeed Mr. Williams.”
“Robert Herz has had a more interesting career than any accountant deserves.”
We probably don’t need to remind you that today is Bob Herz’s last day at the FASB. It’s a sad day indeed for many that have been addressing their poignant comment letters to Roberto for the last eight years.
How Herz is celebrating his last day up in Norwalk isn’t immediately known but we’re sure it involves making crank calls to the American Bankers Association, Barney Frank’s face on a dartboard and plenty of cake.
Not so surprisingly, there’s not much mention of Bob’s last day out there except for cheeky article over at the Economist that informs us of precisely nothing new but manages to give Bob a backhanded compliment and take a major swipe at every single accountant on Earth:
Robert Herz[…]has had a more interesting career than any accountant deserves. He began his tenure as chairman of America’s Financial Accounting Standards Board (FASB) in 2002, dealing almost immediately with the fallout from the Enron and WorldCom scandals, which had been abetted by accountants. He was due to end it on October 1st, a sudden departure for undefined personal reasons, after a crisis also partly pinned on the profession.
Accountants “deserve” boring careers? Their choice of a profession automatically merits a long drab livelihood that involves choice of pen color, whether or not to upgrade the 10-key calculator on their desk and auditing Excel formulas? Forget about the rest of us for a minute; there are people who are ashamed to share humanity with Herz. It’s the man’s last day. Way harsh, Economist.
Beancounter there, done that [The Economist]