On the day of Sir David Tweedie’s retirement, no less.
Japan is considering postponing the mandatory introduction of global accounting standards for all listed companies beyond the original target date of 2015, amid strong opposition to the change from the country’s business community. Japan’s financial services minister, Shozaburo Jimi, said Thursday at a Business Accounting Council meeting, hosted by the Financial Services Agency, that making Japanese companies adopt the rule—known as the International Financial Reporting Standard—within a few years could be a big burden and costly for businesses. “If Japanese firms are required to move to IFRS, we will need enough time, five to seven years, for preparation,” Mr. Jimi said, adding that discussions over the matter will take time.
In case you forgot, Sir David Tweedie is retiring next week as the head of the IASB. It’s been quite a run for Tweeds and good money says his friends at the Board will send him off in style worthy of a knighted Scotsman (read: getting him blind drunk and some hooliganism). He’s had many accomplishments in his time running the IASB but there’s one goal that will ultimately elude him when he hangs up the eyeshade. That is the dream of converged accounting standards. It certainly has been a noble quest worthy of his accounting “rock star” status but you can’t help but imagine that you might happen across SDT in a pub muttering to himself over a pint about “the one that got away.”
Sir David’s biggest project has been convergence of IASB’s rules with those of America’s Financial Accounting Standards Board (FASB). The two had set a June deadline, timed to coincide with Sir David’s retirement, to iron out their differences. That won’t be met.
But you can’t do it all. So now the task of accounting rule copulation will now fall to Dutchman Hans Hoogevorst but if Sir David is feeling a little like a failure, he should know that there are people out there still think he’s pretty badass since he got the SEC to come to the table:
Sir David should not be too disappointed that convergence is not complete. That the process has come as far as it has—and that America’s Securities and Exchange Commission might decide later this year to adopt IASB’s standards—is something no one could have predicted ten years ago, says Nigel Sleigh-Johnson of the Institute of Chartered Accountants of England and Wales.
So enjoy your retirement, oh knighted one. Your double-entry immortality is secure.
The balladeer of the balance-sheet [The Economist]
Speaking at The Wall Street Journal’s annual CFO Network meeting in Washington D.C., Schapiro readily admitted that there isn’t a big push from either multinationals or shareholders to move to international financial reporting standards.
In response to a question from Bank of America’s CFO, Chuck Noski, Schapiro said, “We have not heard from a lot of shareholders that we have to go (to IFRS). We’ve heard the contrary… ‘Why would we take this step toward international accounting standards?’” [CFOJ]
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) today issued new guidance on fair value measurement and disclosure requirements for International Financial Reporting Standards (IFRSs) and US generally accepted accounting principles (GAAP).
The guidance, set out in IFRS 13 Fair Value Measurement and an update to Topic 820 in the FASB’s Accounting Standards Codification® (formerly referred to as SFAS 157), completes a major project of the boards’ joint work to improve IFRSs and US GAAP and to bring about their convergence.
The harmonisation of fair value measurement and disclosure requirements internationally also forms an important element of the boards’ response to the global financial crisis.
Of course what’s most important is that wily Scotsman and knight of the double-entry roundtable Sir David Tweedie will be able to call it a career knowing that he saw this thing through. He sounds pretty pleased with the effort saying, “The finalisation of this project marks the completion of a major convergence project and is a fundamentally important element of our joint response to the global financial crisis. The result is clearer and more consistent guidance on measuring fair value, where its use is already required.” Hans, you can take it from here.
We’re sure all of you have been anxious for an update since the last FASB/IASB progress report last November, wait no longer.
• Completed five projects: In the next few weeks the IASB will issue new standards on consolidated financial statements (including disclosure of interests in other entities), joint arrangements and post-employment benefits and both boards will issue new requirements in relation to fair value measurement and the presentation of other comprehensive income.
• Given priority to the three remaining Memorandum of Understanding projects, as well as insurance accounting: The Boards have made substantial progress towards completion of the three remaining MoU projects covering financial instruments accounting, leasing and revenue recognition, as well as their joint project to improve and align US and international insurance accounting standards.
• Provided for further time to finalise their convergence work: The boards have agreed to extend the timetable for the remaining priority convergence projects beyond June 2011 to permit further work and consultation with stakeholders in a manner consistent with an open and inclusive due process. The convergence projects are targeted for completion in then second half of 2011 (however, the U.S. insurance standard, which has not yet been exposed, is targeted for the first half of 2012).
Wait a second, did they really say that putting off more convergence work is an accomplishment? That’s our kind of work right there. IASB Chair Sir David Tweedie and FASB Chair Leslie Seidman didn’t let that little detail deter them from patting themselves on the back for a job well done. Said Sir David, “the convergence programme continues to raise the standard of financial reporting worldwide, delivering much-needed improvements in key areas and providing a solid platform for global high quality standards.” What is that even supposed to mean? Sounds like the same pro-convergence gibberish we’ve been hearing all along.
Someone come get us when this actually means something.
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]
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.
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]
That being said, Jim Kroeker will have you know that things are going along swimmingly, per the Commission’s press release:
“The staff has invested significant time and effort in executing the Work Plan, and we’ve made great progress to date,” said SEC Chief Accountant Jim Kroeker. “This progress report emphasizes the importance of transparency in the staff’s activities, and can help the public’s understanding of the magnitude of this project and the staff’s progress.”
So make no mistake; the SEC is on this. However, they do have some concerns, “[W]hether the international accounting rule maker is truly independent and whether IFRS is high quality.”
So if you could address those two things, that would be appreciated. Sir David.
“They will help investors to better understand off-balance sheet risks, and to alert them to the possibility of so-called window dressing transactions occurring at the end of a reporting period.”
~ Sir David Tweedie talking up the new rules that were published by the IASB today.
Look, pal. We get that you’re anxious to slap these sets of accounting rules together like an IKEA ottoman. We also get that you and a certain knight want – nay – need the RW&B to be on board.
But we don’t know who you’re trying to boss here. See, we’re fairly certain you’d be speaking German if it wasn’t for us. Furthermore, in case you haven’t noticed, we like dragging things out until the last possible minute. Or just ignoring things until we have a giant mess on our hands and then we try cleaning up. Why would we treat IFRS any different?
We understand it’s a new century, millennium and you guys have a rough go in the World Cup but you can give it a rest.
We’ll get to IFRS when we’re good and ready and just because today is Bob Herz’s last day at the FASB doesn’t mean you need to get all anxious about it:
The US is due to make a decision about whether fully buy in to international standards in the latter half of next year. There has been speculation that the appointment of a new chairman for the US standard setter, FASB, could determine which way the world’s biggest economy will go on international standards.
In a speech yesterday to a conference organised by European financial think tank EUROFI, Barnier welcomed the involvement of the US in the Basel talks on financial regulation. But he added that the US should not part company with IFRS.
“It’s essential that we adopt the same prudential framework. I say this very simply, we cannot afford to take the risk of divergence in this area. And this is also the case for accounting standards,” he said.
EU chief urges US to buy into IFRS [Accountancy Age]
AIG to Convert Preferred Shares Into Common to Repay U.S. [Bloomberg]
“American International Group Inc. agreed with U.S. regulators to repay its bailout by converting the government’s holdings into common shares for sale, a step toward independence for the insurer whose near collapse two years ago threatened the global economy.
The U.S. Treasury Department will convert its preferred stake of about $49.1 billion for 1.66 billion shares of common stock and then sell the holdings in the open market, AIG said today in a statement. Common shareholders, who hold about 20 percent of the company, will have their stake dilut ent, the insurer said. Those investors will receive as many as 75 million warrants with a strike price of $45.”
Spain loses AAA status, stands firm on austerity [Reuters]
“Spain lost its final top-line debt rating on Thursday as the government sought backing from lawmakers for a budget it hopes will be austere enough to convince markets it can slash the deficit at a time of economic weakness.
Moody’s become the third and last rating agency to cut Spain out of the highest AAA category which has helped it finance its debt relatively cheaply. The one-notch cut had been expected and the agency said it hoped not to have to cut again soon, bolstering Spanish debt markets.
But the agency also said a poor growth outlook meant Madrid would have to take further steps to meet its deficit targets in years to come. The Bank of Spain said a sluggish recovery would slow further in the third quarter.”
IASB head knows all about cross-channel frictions [FT]
“In a decade spent overseeing international accounting standards, Sir David Tweedie has become an amateur student of French psychology.
The Scot has locked horns with France several times as head of the International Accounting Standards Board, the body that sets the International Financial Reporting Standards rules followed in the European Union and other countries.
His fascination for his adversary is such that he recently thrust into my hands an academic paper entitled “France and the ‘Anglo-Saxon’ Model: Contemporary and Historical Perspectives”. The article explores the hostility often felt in France towards the British and American way of doing business.”
McDonald’s May Drop Health Plan [WSJ]
“While many restaurants don’t offer health coverage, McDonald’s provides mini-med plans for workers at 10,500 U.S. locations, most of them franchised. A single worker can pay $14 a week for a plan that caps annual benefits at $2,000, or about $32 a week to get coverage up to $10,000 a year.
Last week, a senior McDonald’s official informed the Department of Health and Human Services that the restaurant chain’s insurer won’t meet a 2011 requirement to spend at least 80% to 85% of its premium revenue on medical care.”
Wal-Mart picks successor to longtime CFO [Reuters]
“Wal-Mart Stores Inc (WMT.N) named Charles Holley to succeed Chief Financial Officer Tom Schoewe, who will retire on November 30.
The world’s biggest retailer said on Wednesday that Schoewe, 57, will stay at Wal-Mart until January 31 to help with the transition.
Holley, 54, joined Wal-Mart in 1994 and is treasurer and executive vice president of finance.
Those credentials should make him a capable CFO, said Wall Street Strategies analyst Brian Sozzi, though Wall Street could view the transition negatively since it adds uncertainty.”
All We Are Saying Is Give Dick Fuld a Chance [Jonathan Weil/Bloomberg]
Names being floated to replace Larry Summers as the National Economic Council include Citigroup Chairman Dick Parsons and Xerox CEO Anne Mulcahy. Jonathan Weil sees where Obama is going with this:
“There’s much we can learn about the kind of person the president is looking for by studying these two contenders’ credentials. In addition to CEO chops, it seems Obama is seeking someone who also has served on the board of directors of at least one company that either had a massive accounting scandal, blew up so spectacularly that it threatened to take down the global financial system, or both.”
…and doesn’t think he’s aiming high enough. He has some of his own suggestions.
Sharpton faced with fresh tax woe [Tax Watchdog]
The Rev. owes around $538k to the IRS for 2009. His lawyer is a tad confused by the whole thing and says everything will paid up by Oct. 15th.
Home Buyer Tax Credit Price Tag: $22 Billion [WSJ]
“The total estimated cost of the home buyer tax credits is about $22 billion, according to a report released by the Government Accountability Office last week. The report looked at all three of the tax credits, which were in effect from April 2008 through June 30, 2010.
As we’ve written, the credits did a lot to juice sales. But many have argued that the government incentives basically pulled folks who were already planning to the market earlier. And certainly, we’ve been seeing the post-credit hangover: Home resales dropped to record lows in July. Talk of a housing double-dip is in the air.”
How GM Made $30 Billion Appear From Thin Air [Jonathan Weil/Bloomberg]
General Motors somehow ended up with $30 billion in goodwill on their balance sheet that was on their recent registration statement. Funny thing – the company only has equity of $23.9 billion. Another funny thing – the company said that the goodwill number would have been less if they were a better credit risk.
But don’t worry, apparently this is all in accordance with fresh-start accounting.
Bringing the US on board [Accountancy Age]
“Sir David is a realist – the two accounting codes will never match. ‘There’s absolutely no way [international standards] can converge with US GAAP – you can’t converge two and a half thousand pages with seventeen and a half thousand. There are going to be differences,’ he said.”
The New Threat To Your IRA: An IRS Crackdown [Forbes]
“After years of haphazard enforcement, the Internal Revenue Service is starting to systematically search out violations of the convoluted rules governing individual retirement accounts. There’s a lot at stake. Americans hold $4.3 trillion in IRAS, and the cost of even innocent mistakes can be steep; if you miss taking a required payout from your IRA, Uncle Sam will demand half of the amount you forgot to take as a penalty.
The IRS was prodded to act by the Treasury Inspector General for Tax Administration. In a report earlier this year it concluded that IRA violations have been growing and estimated that more than half a million taxpayers either missed required payouts or contributed more than allowed to IRAS during 2006 and 2007.”
Grant Thornton responds to non-executive code [FT]
“Grant Thornton has become the first major UK auditor to respond to new governance rules by announcing the appointment of independent non-executive directors to help oversee its business.
The accountant’s UK arm said on Wednesday that it had recruited Richard Eyre, a media industry veteran, Caroline Goodall, a lawyer, and Ed Warner, the head of the governing body for UK athletics, to fill the posts.”
Thomson Reuters Releases First iPhone(R) App for Tax and Accounting Professionals [PR Newswire]
“The Tax & Accounting business of Thomson Reuters is pleased to announce the release of Mobile CS, a first-of-its-kind iPhone app for tax and accounting professionals. Using advanced mobile application technology, this comprehensive practice management tool extends the reach of Practice CS(R) from desktop to iPhone, giving more than 60,000 Practice CS users the ability to access key firm, staff, and client data anytime, anywhere.”
Glaxo Taps Goldman Deal Maker as Finance Chief [WSJ]
“GlaxoSmithKline PLC Wednesday chose Simon Dingemans, a Goldman Sachs Group Inc. deal maker, to be its next chief financial officer but said the choice won’t change its cautious approach to mergers and acquisitions.
Mr. Dingemans, 47 years old, will succeed Julian Heslop, who will retire from the post at the end of March. Mr. Dingemans has advised Glaxo on an ad-hoc basis over the years and is currently managing director and partner with Goldman Sachs in London. He joins the U.K.’s biggest drug maker as chief financial officer designate and executive director from Jan. 4, 2011. He most recently worked with Glaxo to establish ViiV Healthcare, GlaxoSmithKline and Pfizer Inc.’s joint venture for AIDS drugs.”
Gun-slinging accountant loses Chapter 7 battle [South Florida Business Journal]
“Jay Levin, a Boca Raton accountant who shot and killed a teenager in 2003, has lost his battle to erase a $750,000 judgment related to the shooting.
Levin shot Mark Drewes, his 16-year-old neighbor, in the back after the teen rang Levin’s doorbell in a “ding-dong-ditch” prank one night, according to motions in Levin’s Chapter 7 bankruptcy case.
Levin had filed the bankruptcy in February, alleging he couldn’t pay the $750,000 judgment from a 2007 civil lawsuit Drewes’ parents had filed against him. Levin paid $102,260 of the judgment, but still owes the remainder”
This means you PricewaterhouseCoopers. You’re acting like this convergence/IFRS adoption is just happening too fast, well, Tweeds isn’t having it.
As for you companies out there that actually have to keep their books in tiptop shape, Sir Tweeds isn’t so amused by your bellyaching either. And for the love of God, would everyone quit playing dumb:
“Let’s look at what we’ve got out there at the moment – leases, revenue recognition and insurance. If you’re not an insurance company you’ve got two. Big deal,” he said.
“I’m not terribly sympathetic. It’s not as thought these have sprung out of no where, we’ve been working on these, they’ve seen the drafts coming, they know what we’re doing.
Furthermore, maybe if you got some of your people on this instead of writing a comment letter every two seconds, this wouldn’t seem like such monumental task.
“It’s tough, but goodness it’s tough for us too. We can’t keep getting all this advice. We always get conflicting advice. ‘You must have these done by June 2011, but don’t give them to us all at once’,” he said.
Tweedie “not terribly sympathetic” to concerns of standard-overload [Accountancy Age]
~ Update includes comment from IFAC President Robert Bunting of Moss Adams
Maybe! After all, anything’s possible. The Herz retirement wasn’t exactly expected but since Roberto had two years left in his terms but it’s been suggested that it’s been a rough two years since Barney Frank gave him the tongue lashing of his life over the whole mark-to-market thing.
Regardless, The Journal put it out there that the timing of Herz’s departure causes hella handwringing, most notably on the convergence efforts:
FASB will now have to replace Mr. Herz at the same time that the IASB is already cessor to its chairman, David Tweedie, whose terms expires in June 2011. This means that both bodies will have new heads as they enter what could prove to be the end game for the often-thorny process of converging two accounting standards.
This, of course, causes the U.S. GAAP Hawks to squeal with glee and those in pro-IFRS camp to get anxious and will likely lead to heavy lobbying for a replacement that will keep Tweeds dream alive for “one high quality set of global standards” or whatever they’re calling it these days.
Despite the Journal’s anxiety, International Federation of Accountants President Bob Bunting sees the change as an opportunity and things will continue to progress, “While the changes of leadership at the FASB and the IASB offer the opportunity for a fresh look at the convergence process, I would be surprised if any radical change in direction occurs,” Mr Bunting wrote in an email to GC, “The financial market forces and public interest arguments for convergence of the two standards, and possible eventual adoption of IFRS as a single standard continue to be very strong.”
However, since the FASB is expanding back to seven members, that will likely slow the process down (which makes some people happy) even further, especially with empty seats at the table:
The lack of a full board is likely to slow many of FASB’s projects, particularly the move to converge with international rules, said former FASB Chairman Dennis Beresford. “They’re not going to issue anything important on the basis of having only four board members,” he said, adding that Mr. Herz’s departure came as “a complete surprise.”
So, with those seeds of doubt planted, let’s put it to a vote.
GM’s balance sheet draws praise ahead of IPO [MarketWatch]
“Peter Bible, partner-in-charge at accounting firm EisnerAmper LLP, said General Motors is now carrying a much stronger balance sheet than its predecessor, based on the company’s initial public offering filed late Wednesday. ‘Their debt-to-equity ratio looks handsome,’ Bible said in an interview. ‘This thing has gotten restructured quite a bit. GM’s health care liabilities have fallen significantly. As I look at the balance sheet, it is much healthier.’ ”