Tag: FASB

Accounting News Roundup: Ernst & Young Is All Over the Emmys; PwC’s Diversity Plea; Switching SaaS Providers Should be Simple | 08.18.10

FASB’s Tort Bar Gift [WSJ]
“In the eternal war between the plaintiffs bar and corporations, the lawsuit pack already owns the Senate andNow it seems the nation’s accountants want to give the lawyers another edge.

The Financial Accounting Standards Board (FASB) will soon begin considering whether to require companies to account for the potential cost of ongoing litigation. Supporters insist this is merely about disclosure, but the proposal would hurt investors by offering roadmaps for new litigation and bigger settlements. We first wrote about this in 2008, and FASB retreated amid a business backlash. But FASB’s revised proposal, issued last month, isn’t much better.

Take the provision requiring companies to disclose their liability insurance coverage. Lawyers would be able to target their damage requests to the coverage maximum, or launch new lawsuits in the knowledge that more insurance dollars remain. This is why judges typically insist that coverage only be divulged under a secrecy order.”

Emmy votes are in and now it’s time to start counting [Los Angeles Times]
“With the Emmy Awards just a week and a half away, Ernst & Young LLP, the accounting firm in charge of counting the thousands of votes, will now kick into high gear figuring out who will be going home with a trophy come Aug. 29.

The deadline to get ballots in was 5 p.m. Tuesday. The last vote, as always, was turned in by veteran actress Jody Carter, who actually comes down to the firm’s downtown offices to fill out her ballot in person and turn it in to Andy Sales, the Ernst & Young lead partner for the prime-time Emmy Awards.”

Judge Denounces a Barclays Settlement [Reuters]
“The judge, Emmet G. Sullivan of Federal District Court, said at a hearing Tuesday that he was concerned about the proposed deal in which the bank had agreed to pay $298 million to resolve the charges over its dealings with Cuba, Iran, Libya, Sudan and Myanmar.

“This is a sweetheart deal,” Judge Sullivan said, adding that the average American citizen who gets caught robbing a bank does not get a deferred prosecution agreement, as Barclays did.


PricewaterhouseCoopers Calls on Organizations to Manage Diversity with their ‘Heads, Hearts and Wallets’ [PR Newswire]
“Organizations that leverage diverse talent and manage diversity with their ‘heads, hearts and wallets’ will gain long-term competitive advantages, noted Greg Garrison, Partner and Vice Chairman, PricewaterhouseCoopers LLP (PwC), in a keynote speech at the 2010 Ascend Annual Gala. Ascend is a 5,000-member professional leadership organization dedicated to leveraging the potential of pan-Asians.

Though organizations typically approach diversity from three perspectives — the head, which looks at diversity academically; the heart, which view it in moral terms; and the wallet, which ties diversity efforts directly to the bottom line — unsuccessful diversity commitments often occur because organizations approach the effort from just one of those mindsets.

‘Successful leaders approach diversity using all three lenses,’ stressed Garrison. ‘Looking through these lenses, leaders must act upon what they see and anticipate what is to come to successfully shape the talent that will drive business performance.’ “

Office-Leasing Rebound Could Be Deceiving [WSJ]
“In New York, accounting giant Deloitte recently asked the city for $11 million in tax breaks that would support a consolidation of its New York offices at 4 World Financial Center in downtown Manhattan. Under the lease deal, which isn’t final, Deloitte—which now occupies some 934,000 square feet of office space in the city—would eventually move those operations into just 390,000 square feet at 4 World Financial Center, with options to expand to 630,000 square feet.

Deloitte would spend more than $90 million on building and fitting out the space with a new, more efficient design, according to its application for the tax breaks.”

IRS Probes Apple Employee for Kickbacks [Debits & Credits]
“A grand jury charged Apple’s global supply manager, Paul Shin Devine, who was responsible for selecting suppliers of enclosure materials for headsets for the iPhone and iPod. According to Justice Department prosecutors, who carried out a joint investigation with the IRS’s Criminal Investigation division and the FBI, Devine allegedly transmitted confidential internal Apple information to suppliers in China, Singapore, South Korea, and Taiwan. In return, the suppliers agreed to pay him kickbacks, including payments based on a percentage of the business they did with Apple.”

SaaS switching – should we care? [AccMan]
“In theory at least, a SaaS/cloud approach makes it very easy to switch and the cost is relatively low, provided there isn’t a huge amount of data that needs unpicking and reforming. There is no throwing away of capital investments so no need to justify the decision in the same way you would if you’d installed an on-premise solution. Service providers that offer a freemium approach or a limited try-before-you-buy arrangement may appear attractive but even then it is only as you start to iron out the wrinkles that you find where the weaknesses lay.”

Good Riddance to Old Lease Accounting Rules

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

I see that FASB is sticking to its schedule for ending most off-balance-sheet treatment for leases, and so is the IASB. It’s about time, frankly, if only to spare us poor, I mean, intrepid financial journalists from having to sort through the particulars of the current accounting treatment a moment longer than necessary.

I speak from personal experience here, having wrestled with the false distinction between capital and operating leases for a sidebar to a piece I wrote for CFO Magazine way back when. The article delved into the details of a particularly complex variation that companies were using to finance real estate, called synthetic leases.

I swear, that sidebar itself shaved a year off my life, and at my age, every one counts, and did even a decade or so ago.


In fact, the hoops that companies must jump though to get a deal to qualify as an operating lease still make my head spin. Consider: In order to qualify, the current rule, known as FAS 13, requires that the lease fail all of four tests aimed at distinguishing the financing from being the equivalent of ownership.

The thing that puzzled me about all this is that many, if not most, CFOs claimed that accounting treatment wasn’t the reason, or at least not the main one, that they used such financing techniques in the first place.

But the reason they gave often came down to their advantageous cost, and like all off-balance-sheet financing techniques, I could never quite understand how that lower cost arose without the accounting treatment.

After all, it seemed to me the only reason operating leases were less expensive than capital leases was that the underlying asset wasn’t counted as the property of the company by a sufficient number of investors willing to therefore pay a premium for the company’s equity. And if they did that, they were ignoring the fact that the asset was indeed the property of the company on anything other than a narrow, legal basis, and that the arrangement wasn’t financing its purchase.

So tell me again how off-balance-sheet financing results in lower cost if it doesn’t really do that.

Accounting News Roundup: JetBlue CFO Isn’t as Good at Gathering Trash as He Is with Spreadsheets; Dealing with a New Boss; IRS: Regs Won’t ‘Weed Out’ Preparers | 08.13.10

JetBlue CFO Flies Cross-Country, Collects Garbage [NYM]
JetBlue CFO Ed Barnes and VP Robin Hayes reportedly did their best to show up Steven Slater on a recent flight from New York to Long Beach. Apparently it is not uncommon for JetBlue execs to help out during the flight, however passengers can spot an amateur/numbers person when they see one:

“Barnes took one of the most challenging of the flight attendant’s duties upon himself: He gathered trash. ‘He never served anything, but he was the trash guy. He must have gone by eight times,’ our source said. ‘And he was kind of bad at it. He was really tall. There’s an art to reaching over people’s heads and h and not spilling it.’ Apparently both men were very nice, especially considering that the CFO was ‘clearly a guy who is used to doing spreadsheets and is now gathering trash.’ “

Leverage FASB Tools to Catch Up on New Accounting [Compliance Week]
“Although the FASB is a on a fast track to issue a host of major new accounting standards as part of its effort with the IASB to converge U.S. and international rules, the board has coupled that with an effort to get resources out that can help key stakeholders grasp the new era of accounting that is just dawning. In addition to the usual discussion papers and exposure documents laying out the full technical detail of its plans, the board also is publishing user-friendly summaries and producing podcasts and webinars that explain the major new initiatives as they are proposed.”

How to Deal With Your New Boss [FINS]
“You will have to prove yourself all over again. The work culture of the past will change, and the expectations will be intensified, at least in the beginning. Experts agree there are specific ways to respond that will maximize your chances of surviving, and even thriving. For finance professionals, managing a new boss comes with some added stressors that professionals in other fields may not experience.”


H-P Board Sued on Hurd Exit [WSJ]
“Hewlett-Packard Co.’s directors got slapped with a lawsuit over the departure of Mark Hurd—the same chief executive who handpicked most of the board’s members—even as they face the task of finding a replacement for the former CEO.

A Connecticut-based law firm filed a shareholder derivative suit in Santa Clara County Superior Court in California on Tuesday against H-P’s board, alleging directors violated their fiduciary duties in connection with the events surrounding the resignation on Friday of Mr. Hurd.”

FDIC opens its doors to carry out financial reform [Reuters]
“Bank regulators on Thursday pledged an ‘open door’ policy for carrying out financial reform, also saying they will inform the public of meetings between senior officials and private sector individuals.

The Federal Deposit Insurance Corp said it will release every two weeks the names and affiliations of people outside of the government who meet with agency officials to discuss implementing the Dodd-Frank law. The subjects that are discussed will also be made public.”

IRS Prepares Preparers for Preparer Requirements [Web CPA]
“An IRS official repeatedly reassured an audience of tax preparers that the agency isn’t aiming to take away their livelihoods or weed out people when its new registration, testing, education and e-file requirements take effect next tax season.”

Wonky Accounting Insight in 140 Characters or Less: The FASB Is Now on Twitter

Technically it’s the Financial Accounting Foundation that has the handle: @FAFNorwalk and it also includes anything the GASB but really the FASB is who we expect to go on the offensive here.


They’ll be able to take on the haters with pithy commentary, give us the latest on their (less) ambitious convergence efforts and maybe, if we’re really, really, really lucky Bob Herz will spin off his own version of @CrankyKaplan. @DisturbedHerz, perhaps?

We have hope.

Fasb Twitter Pr

Does Anyone Care About Fair Value Anymore?

Fair value is a simple enough concept even if you aren’t an accountant: stuff is worth what you could sell it for in the normal course of business, so that’s what you value it as when you’re adding up the value of the stuff you have. Easy, right? Not so easy when it comes to convergence.

The IASB has already expressed distaste for our fair value rules (among other things) and Accounting Onion recently shared some concerns that convergence might require a reasonable definition of “High Quality Accountant Standards” (abbreviated HQAS” by AO) agreed upon by both FASB and the IASB. So far I haven’t seen it, has anyone else?

Wait, AO launches off into it fhan I ever could.

Moreover, if there are some doubts as to what HQAS is, the SEC’s view could have been attended to more closely at the outset of formal convergence efforts (October 2002); for surely the SEC had convergence in mind when they published their congressionally mandated (see the Sarbanes Oxley Act, Section 108(d)) report on the feasibility of “principles-based” accounting standards in August 2003. According to the SEC, the “objectives-oriented” standards they are looking for from a standard setter should possess the following qualities:

“Be based on an improved and consistently applied conceptual framework;

Clearly state the accounting objective of the standard;

Provide sufficient detail and structure so that the standard can be operationalized and applied on a consistent basis;

Minimize exceptions from the standard;

Avoid use of percentage tests (“bright-lines”) that allow financial engineers to achieve technical compliance with the standard while evading the intent of the standard.”

Now, seven years later, the SEC’s battle plans have been subordinated by the din and desperation of convergence wars. Are any new standards from either board “based on an improved and consistently applied conceptual framework”? Obviously not, for nary a single alteration to any conceptual framework document has occurred in the last seven years. The existing definitions for assets and liabilities are like wooden ships sent to battle against nuclear submarines.

A few weeks back, I talked to David Larsen, CPA, Managing Director of global advising firm Duff & Phelps, LLP about this fair value bullshit that complicates my life by requiring comment every few weeks. David participated on the SEC mark-to-market panel in November of 2008 and serves on FASB’s Valuation Resource Group so he’s familiar with what I’m talking about.

David believes public opinion dominates the fair value argument and really doesn’t see what the big deal is. “The goal is to make financial statements more readable,” he said of fair value’s ultimate intention. He’s a fan of transparency on the face of financial statements and more disclosures. Who doesn’t like that?

He says fair value is purely measurement and disclosure, nothing to get upset about.

In my opinion, fair value was our first test to see if we could handle the principles widely used in international accounting “standards” (hopefully “HQAS”) before we actually committed to adopting them and we failed. If you wonder why the IASB wants to hold the floor when it comes to convergence, you only have to stare our treatment of fair value right between the eyes.

It should have worked but our “P for Principles” in GAAP didn’t adequately prepare us to handle it.

FASB to Make Heads or Tails of Repurchase Accounting Soon Enough

Back in April when he was testifying before the House Financial Services Committee, FASB Chairman Bob Herz couldn’t really say one way or another what he thought about the repurchase accounting that Lehman Brothers was using.

At the time, Herz just said that FASB would work diligently with the SEC (no porn allowed), that Lehman skirted the disclosure rules and that they were going to get to the bottom of this, come hell or Barney Frank’s shrewd disposition.


In a recent meeting with his fellow double-entry wizards in Norwalk, Herz said that he was opening up ‘a very targeted scope project’ that will get to the bottom of this pile:

“Once we’re made aware that people are trying to structure around specific provisions in the accounting literature, it makes you think about whether those provisions need to be looked at,” he told the board. “We’ve asked the staff to take a look at that and come back with some recommendations in the pretty near term,” he said.

FASB Plans New Rules Around Repurchase Agreements [Compliance Week]

Accounting News Roundup: 1099 Reporting Is the Latest Political Football; Financial Reporting Overhaul in the Works?; Zynga’s CFO Hire Spurs IPO Talk | 08.02.10

Parties Play Politics With Unpopular Tax Measure [WSJ]
The new 1099 reporting requia bit of belly aching to point of many groups asking for a repeal. Too bad the members of Congress are the ones with the power to actually make something happen:

“The House rejected a bill Friday that would have repealed the provision. The two parties disagreed on how to make up the lost revenue.

‘This foolish policy hammers our business community when we should be supporting their job growth,’ Sen. Mike Johanns of Nebraska said in the Republicans’ weekly radio and Internet address Saturday. ‘It’s only one example of how the administration’s promise to support small businesses really rings hollow.’

Democrats blamed Republicans for Friday’s failure.

‘Despite all of their rhetoric about the need to eliminate this reporting requirement, Republicans walked away from small businesses when it mattered most,’ said Rep. Sander Levin (D-Mich.), chairman of the House Ways and Means Committee.”

FASB Alumnus Trashes GAAP (and IFRS) [The Accounting Onion]
“I suspect that the folks being paid the big bucks to make the tough calls on accounting standards don’t pay a lot of attention to to the likes of Tom Whatshisname, even were I to announce that the sky is falling. But, I don’t take it personally. Over the past 40 years, any PhD not drawing a salary from the Big Four has been viewed with more suspicion than respect by the standard setting establishment.

I mention all of this now, because there is a new voice, whose credibility and qualifications cannot be so easily dismissed. That voice belongs to FASB alumnus David Mosso, who has written an 80-page monograph entitled Early Warning and Quick Response: Accounting in the Twenty-First Century). If you don’t want to believe me, take it from him: GAAP is broken.”

Group formed to overhaul financial reporting [Accountancy Age]
Meanwhile: “A project to overhaul company reporting has been launched by a high level group of accountants, businesses, regulators and market participants.

The International Integrated Reporting Committee will look at the wider concerns about financial reporting, in terms of addressing risk, and presenting a clearer and broader picture of companies’ performance, including governance and environmental issues.”


Goldman Details Its Valuations With AIG [WSJ]
“How did Goldman come up with the mortgage-securities prices it used to extract cash from AIG?”

Before There Can Be An IPO, First Comes A New CFO For Zynga [Tech Crunch]
Dave Wehner comes in from Allen & Co. taking the spot of Mark Vranesh who is becoming Chief Accounting Officer. What does all this mean? First, it gives most MSM outlets a day or two worth of stories about when Zynga will go public but mostly it means the business of Farmville, no matter how you hate it, is serious business.

Facebook Would-Be Owner Says He Owes His Claim to Arrest [Bloomberg]
“Paul Ceglia, who claims in a lawsuit that he owns 84 percent of Facebook Inc., said his case wouldn’t have been possible if state troopers hadn’t come to his house in October to arrest him for fraud.”

Forced Employee Engagement and the Overworked Employee [The Exuberant Accountant]
“In my many interactions with business owners, I have heard some speak of employees as being ‘lucky to still have a job.’ While that may be true, thinking (and acting) in such a manner is very short sighted.”

Twitter, Facebook, LinkedIn? [AccMan]
Got business model?

Accounting News Roundup: Rangel Found to Have Violated Ethics Rules; Friends of “Miami’s Go-to Forensic Accountant” Ask for Leniency; A “Refreshing” Settlement | 07.23.10

Rep. Charles Rangel broke ethics rules, House panel finds [WaPo]
“A House ethics subcommittee announced Thursday that it found that Rep. Charles B. Rangel violated congressional ethics rules and that it will prrobably beginning in September. The panel is expected to make the details of his alleged violations public next Thursday.

Rangel (D-N.Y.) has been under the House ethics committee’s microscope since early 2008 after it was reported that he may have used his House position to benefit his financial interests. Two of the most serious inquiries have focused on Rangel’s failure to declare $239,000 to $831,000 in assets on his disclosure forms, and on his effort to raise money for a private center named after him at City College of New York using his congressional letterhead.”

Geithner: Taxes on Wealthiest to Rise [WSJ]
“The Obama administration will allow tax cuts for the wealthiest Americans to expire on schedule, Treasury Secretary Timothy Geithner said Thursday, setting up a clash with Republicans and a small but vocal group of Democrats who want to delay the looming tax increases.

Mr. Geithner said the White House would allow taxes on top earners to increase in 2011 as part of an effort to bring down the U.S. budget deficit. He said the White House plans to extend expiring tax cuts for middle- and lower-income Americans, and expects to undertake a broader revision of the tax code next year.

‘We believe it is appropriate to let those tax cuts that go to the most fortunate expire,’ Mr. Geithner said at a breakfast with reporters.”

FASB Requires More Disclosures Around Credit Risk [Compliance Week]
“Accounting Standards Update No. 2010-20, Receivables (Topic 310) calls for more credit risk disclosures to give investors a better view of the credit risk in a company’s portfolio of receivables as well as the adequacy of its allowance for credit losses. Under the update, companies will be required to say more about aging receivables and credit quality indicators in particular.

The new disclosure requirements affect financing receivables and trade accounts receivable, including loans, trade accounts receivable that are greater than a year old, notes receivable, credit cards and receivables for certain leases. The new disclosure requirement does not affect short-term trade accounts receivable, receivables that are measured at fair value or the lower of cost or fair value, and debt securities.”


Convicted accountant Lewis Freeman’s friends urge leniency [Miami Herald]
“Miami’s go-to forensic accountant” Lewis Freeman is to be sentenced today for stealing nearly $3 million from victims of fraud who he was appointed to protect. He faces a dozen to fifteen years in prison but his friends and supporters have turned on the pity party, sending nearly 300 letters to Judge Paul Huck, asking for leniency.

“[E]very one of those letter writers also asks the judge to show mercy, emphasizing that the affable New York native should not have to languish in prison because he has done so much for institutions like his alma mater, the University of Miami, Miami Children’s Hospital and the Miami Children’s Museum, among others.”

No need for non-audit ban, regulator claims [Accountancy Age]
“Accountants will not have to give up their non-audit work for audit clients, under proposed guidelines released today, which have not recommended an outright ban, suggested by politicians in the wake of the financial crisis.

The Auditing Practices Board, of the Financial Reporting Council, which publishes guidance for auditors, does not believe an outright ban on non-audit services should be enacted and has instead proposed to tinker with present disclosure requirements.”

Could This Be a Real Deterrent? [Floyd Norris/NYT]
Despite the usual fare in the SEC’s settlement yesterday, Floyd Norris writes that the $4 million fine for Michael Dell and other executives is “refreshing.”

Accounting News Roundup: Bush Tax Cuts May Still Have Life; FASB’s ‘Religious War’ Rages; Facebook Might Do an IPO Someday | 07.22.10

Bush Tax Cuts Roil Democrats [WSJ]
“Sen. Kent Conrad (D., N.D.) said in an interview Wednesday that Congress shouldn’t allow taxes on the wealthy to rise until the economy is on a sounder footing.

Sen. Ben Nelson (D., Neb.) said through a spokesman that he also supported extending all the expiring tax cuts for now, adding that he wanted to offset the impact on federal deficits as much as possible.

They are the second and third Senate Democrats to come out publicly in recent days in favor of extending all the tax breaks for the time being. Sen. Evan Bayh (D., Ind.) made similar comments last week.”

Madoff’s Ghost Still Haunts SEC [Washington Wire/WSJ]
In testimony earlier in the week, SEC Chair Mary Schapiro told a congressional committee that many of the people that investigated Bernie Madoff – 15 of 20 enforcement attorneys and 19 of 36 examination staffers – have left the Commission. However, that isn’t good enough for Rep. Bill Posey (R – FL).

“Republican Rep. Bill Posey of Florida –- home to many Madoff victims -– said he wants to know if those SEC employees ended up at other regulatory agencies, working for companies they were supposed to regulate, or retired with government pensions.

‘There’s a necessity to know where they went,; said Posey. ‘It’s like letting a pedophile slink out the door or change neighborhoods. We’re dealing with the same type of problem here.’

Schapiro strongly disagreed. ‘These aren’t bad people. In some cases they were people who were very junior and not adequately trained or supervised.’ In other cases, she said, they were pulled from one project to another.”

Despite the proclivities of some SEC employees, we haven’t seen anything warrant that particular label.


FASB in “religious war” to bring in fair value [Accountancy Age]
Lawrence Smith believes in fair value, you might say, in a fanatical sense. The FASB Member was quoted in AA, “Some people have advised us that we shouldn’t say this, but I’ll say it – fair value, to some of us, is almost like a religious war out there and we are trying to deal with that as best we can.”

This isn’t the first time we’ve heard a FASB member drop the relidge war rhetoric. Marc Siegel used similar language last summer, so there seems to be at least a smidge of seriousness behind .

Plus, at the rate things are going, the debate will soon reach Israel/Palestinian ignorability (word?) levels later this year.

Facebook IPO “when makes sense”, Zuckerberg tells ABC [Reuters]
That is, never.

Trust, but verify [MJS]
Starting now!

Accounting News Roundup: Bankruptcy Examiner to Investigate WaMu Failure; Ex-KPMG Tax Principal Pleads Guilty; UK Inspector Says Audits Need ‘Significant Improvement’ | 07.21.10

WaMu Shareholders Win Court Investigation of Biggest U.S. Bank Failure [Bloomberg]
WaMu gets their very own Anton Valukas! Colorful claims to come? “Shareholders of Washington Mutual Inc. won court approval of a new investigation of the biggest U.S. bank failure, further delaying the company’s effort to reorganize in bankruptcy.

U.S. Bankruptcy Judge Mary F. Walrath in Wilmington, Delaware, agreed that an examiner should be appointed to review WaMu’s assets, including the value of a potential lawsuit against JPMorgan Chase & Co. and the Federal Deposit Insurance Corp. for their role in the 2008 collapse of Washington Mutual Bank.”

Ex-IRS agent pleads guilty [WaPo]
John Venuti was also with KPMG from 2002 to until this past January. WaPo reports that he was a “tax consultant and principal.”

“According to the plea agreement, Venuti did not file federal tax returns from 2001 to 2006. Each year, though, he requested and was granted a six-month extension, and made a total of $97,060 in payments along with the extension requests. Authorities said he owes more than $789,000 in back taxes.”

Reckitt to Buy Durex Maker SSL [WSJ]
“Pushing further into the lucrative over-the-counter medical market, U.K. consumer-goods firm Reckitt Benckiser PLC agreed on Wednesday to acquire health-care-product company SSL International PLC, in a deal that values the world’s biggest condom maker at £2.54 billion ($3.88 billion).”

FASB Reveals Second Attempt at Standard on Contingencies [Compliance Week]
“The standard differs from one the FASB published in June 2008, which called on companies to use some conjecture and provide estimates of possible outcomes. Corporate counsel in particular buried FASB with objections that the proposed approach would force disclosure of privileged information, especially by giving legal adversaries access to information that would compromise the outcome of disputes. The current proposal steers clear of any requirement for companies to make any predictions or estimates about possible outcomes.”


FTSE 100 audits require “significant improvement”, inspectors find [Accountancy Age]
“Auditors have also been accused of altering documents before handing them to regulators and putting cost savings ahead of quality, in the review by the Audit Inspection Unit (AIU).

The report raised a number of concerns following its inspection of 109 audits from AIM and the FTSE 350.

The report also found some cases where partners signed audit reports before the audit was complete and one instance when an auditor tried to alter an internal file after the AIU requested it. Auditors had also changed internal materiality thresholds, which effectively reduced their workload, and had also not applied enough scepticism to internal asset valuations.”

More Than a Few People Didn’t Heed the ABA’s Advice re: “Fair Value Sucks” Letters to the FASB

Just last week we mentioned the American Bankers Association and its efforts to undermine the FASB’s latest fair value proposal that, in the ABA’s mind, could bring down civilization as we know it.

Because of this danger, the ABA encouraged “investors” through email and on its website to write individual letters to the FASB, expressing their displeasure with the worst idea in the modern history of double-entry accounting. We say “investors” because the ABA not-so-subtly asked everyone (i.e. who felt the overwhelming urge to write Bob Herz & Co.) to refer to themselves as such.

Further, the ABA provided a template of a letter to send to the Board for the “investors,” however, it did warn to resist using the example as their own because A) this is far too important and telling the FASB that fair value pains you in the deepness of your soul and takes food out of your children’s mouths will be a far more effective narrative; and B) the FASB hates form letters. HATES. So much so that Bob Herz rips up all his gold stars that he gives for the constructive letters he receives and then your unoriginal ass gets negative points.

The group urges investors to “write your own letter — the FASB does not appreciate ‘form’ letters, and often discounts them in their analyses.”

Simple enough, right? Well, maybe. But In his column today, Jonathan Weil gives an example of one ABA soldier that wasn’t very good at following instructions:

Among the letter writers was Terry L. Stevens of Francesville, Indiana, who identified himself as a bank investor, as the ABA had suggested. He didn’t mention that he also is chief financial officer and executive vice president of Alliance Bank, a closely held lender in Francesville with $270 million of assets.

“As a bank investor, of utmost importance to me regarding the banks in which I own stock is their financial position, and transparent financial reporting is key in order for me to make investment decisions,” Stevens’ letter said. “With this in mind, I am writing to express my deep concerns and opposition to the portion of the proposal that requires all financial instruments to be marked to market.”

Stevens didn’t write those words himself. He copied them verbatim from a sample letter the ABA posted on its Web page. So, too, did a bunch of other bankers who submitted comment letters to the FASB opposing its proposal, notwithstanding the ABA’s warning that they shouldn’t do cut-and-paste jobs.

This had to be a mistake, right? This is far too important of an issue to the banks of this country that a mishap like this could just happen. Bankers are responsible people that take this stuff very seriously and would never risk going through the motions just to serve at the whims of their lobby’s voice…would they?

Stevens told me he didn’t have time to write his own letter from scratch. “The points that I grabbed out of their paragraphs did a good job of explaining how I felt about the situation,” he said.

Oh.

Stealth Bankers Bomb as Anti-Reform Crusaders [Jonathan Weil/Bloomberg]

Accounting News Roundup: Congress Still Stalling on Tax Bill; ‘Most Americans Have Not Planned Well for Their Futures’; Deloitte’s Schroeder Joining FASB | 07.15.10

As Tax Cuts’ Expiration Date Nears, Little Consensus [WSJ]
“Lawmakers are negotiating a tax bill, but appear increasingly likely to wait until after the November election to take any final action that could anger voters—either by raising taxes, or by cutting them and thereby deepening deficits. Congress ultimately could decide to extend current tax levels for just a few months, leaving the issue for the next Congress to settle. Another option is a short-term extension of a year or two, avoiding for now the huge cost to the Treasury of a permanent extension. It’s even possible Congress might fail to take any action this year.”

From Jail, Conrad Black Fights $71 Million Tax Bill [Forbes]
“Imprisoned former media baron Conrad M. Black is fighting a $71 million bill from the U.S. Internal Revenue Service, which says from 1998 to 2003 he filed no tax returns and paid absolutely nothing on $120 million in taxable income.

In a previously unreported lawsuit in U.S. Tax Court, Black, now serving a six-and-a-half-year-sentence in a Florida federal prison, is challenging the IRS’ demands and asserting the income in question wasn’t taxable in the U.S.”

Americans More Optimistic on Economy Than Their Own Finances, Survey Says [Bloomberg]
Who said Americans only think about themselves? “Americans are generally hopeful, and much of the economic news leads us to conclude that we are out of the recession and a double dip is unlikely,” said Robert Glovsky, chair of the CFP Board and director of Boston University’s program for financial planners. “With that said, most Americans have not planned well for their futures.”

Harvey Golub Resigns as AIG Chairman [WSJ]
“A weeks-long standoff between the chairman and chief executive of government-controlled American International Group Inc. ended Wednesday, when Chairman Harvey Golub resigned, saying, ‘I believe it is easier to replace a chairman than a CEO.’

Mr. Golub’s decision marks a victory for Robert Benmosche, the company’s hard-charging chief, who chafed under Mr. Golub’s oversight. Mr. Benmosche had told the board their working relationship was ‘ineffective and unsustainable,’ Mr. Golub said in his resignation letter.”

FASB hires expert to review how new rules perform [Reuters]
“Mark Schroeder, a recently retired senior partner at Deloitte & Touche [DLTE.UL], will serve as the board’s first “post-implementation review leader” and also serve a similar role for the Governmental Accounting Standards Board, FASB said.

The hiring of Schroeder is one of the big steps that FASB has taken to formalize its process for review of how new standards are performing. Banks and investors had complained during the financial crisis that FASB’s new rules on mark-to-market accounting had contributed to freezing the credit markets, but there was no formal process for reviewing the rules.”