Marie Leone, CFO.com | US
September 10, 2008
Thank you.
I've always maintained that there is no practical buseness or economic reason to rush into this IFRS fog; but alas why ask why, we are making a monumental blunder by rolling over. I can not beleive we are allowing ourelves to be compromised; let the Chinese and Russians raise capital in their own countries, or in London or Singapore, they are doing it any way. The USA is the last bastion of capitalist soveriegnty left in the world.
I do like the idea of a PCLOB!
Posted by rick macchiarulo | Sep 12, 2008 9:08 AM ET
"To a large degree GAAP complexity is a response to the lawyers in the United States. 80% of the world's lawyers practice in the US. US corporations, investors and accounting firms have had to respond to the amazing litigiousness of their environment by demanding precise accounting standards in order to protect themselves from the lawyers."
Agreed. There are too many lawyers involved in the world of finance. They are not going away, either.
If you look carefully at Sarbanes-Oxley for example (specifically Sec. 101(e)(2)), our legal friends managed to get a limitation in the law that no more than two (recent) CPA's can serve on the PCAOB. In short, the only qualification for a majority of PCOAB members is to be unqualified. (Echoes of HUAC: are you now or have you ever been, a member of the American Institute of Certified Public Accountants)
There is no similar limitation on the number of LAWYERS on the board, despite the fact that the destruction of Arthur Andersen's Enron workpapers was at the behest of legal counsel and all of those sham companies were drawn up by lawyers. I'm still waiting for the "public company attorney oversight board", but am not holding my breath.
In short, Sarbox was a masterful hostile takeover of the accounting profession by the bar. The very idea that the "answer" to the high profile frauds was (more) federal regulation is refuted by the fact that the all-knowing SEC failed to prevent the frauds that percolated in the 90's, nor did the PCAOB/SEC stop the frauds that continue to this day.
Bringing in IFRS "principles" will sweep away all of those pesky GAAP rules enacted in reaction to the threat of litigation, but it won't get rid of that threat. What it will do is impose a system that hasn't been designed for or tested by legions of litigation happy lawyers.
As soon as he lawsuits start, U.S. companies will scream for rules to avert future litigation. Unfortunately, they will fall on deaf ears, since nobody else is going to want to create rules that make their job more complex. Why would we ever want to subordinate ourselves to an unaccountable transnational NGO?
Complaining about the complexity of GAAP and insisting replacing it with IFRS, with all other things staying the same, is a little like taking off a radioactivity-protection suit and putting on a comfy cotton shirt while still standing on a "hot" nuclear blast site.
Posted by Super Heater | Sep 11, 2008 11:50 PM ET
Charles Neimeier is absolutely correct, except he forgot to add the influence of a FASB leader who is an economist by training, rather than a practicing accountant/auditor. Accounting principles and procedures follow from the particular society and its business economy and environment, which is why US GAAP serves us so well. Congress and the SEC, wake up!
Posted by Lucinda Van Alst | Sep 11, 2008 4:52 PM ET
Charlie is a great spokesperson for the freedom of Americans. I have always been impressed by his willingness to take controversial positions. With respect though, he is a lawyer in addition to being a CPA. US GAAP has blossomed from 2000 pages from 20 years ago to over 20,000 pages today. US GAAP is so complex that 99.9% of all accountants, and then the other 4 million people who work in the world of accounting in the United States, do not have sufficient technical skill to apply professional judgment. They have to leave that critical function to the technical departments at the big accounting firms, who don?t especially like it either. This is not the case with IFRS.
To a large degree GAAP complexity is a response to the lawyers in the United States. 80% of the world?s lawyers practice in the US. US corporations, investors and accounting firms have had to respond to the amazing litigiousness of their environment by demanding precise accounting standards in order to protect themselves from the lawyers. In the rest of the world people do not need the same level of detail and don?t want it. I recall a very senior person in the world of accounting once saying to me ?America has the most sophisticated accounting and legal system in the world. The rest of the world is simply trying to catch up?. I disagree.
America has a wonderful and successful business culture, but as with all good things there is a soft under belly. The impact of an overblown legal system has created an environment of tension that is eroding US competitiveness. Yes there are legal systems in other countries, but professionals apply judgment every day which is respected by the people where they live. A handshake is often a bond, rather than a 15 page contract which is deliberately detailed in order to mask the real escape option.
The rest of the world does not need the lawyers? intense scrutiny; their overhead burden on society is too much. Bravo to Chris Cox and Bob Herz for taking bold steps to move the USA into a role where Americans are collaborative players rather than acting like the little boy who wants to take his ball home.
Paul Sharman, former President and CEO, Institute of Management Accountants
psharman@focusedmanagement.com
Posted by Paul Sharman | Sep 11, 2008 10:07 AM ET
Well done guys! When Americans investigate an issue of public interest, they do it publicly!! When IFRS became obligatory in Europe, we (I'm in France) had a helluva job finding out the real issues, because nothing was posted. At least now, whoever you agree with, these important issues are being openly discussed. Keep it up, chaps! (and I'm British ;o)
Posted by Stephanie Campion | Sep 11, 2008 5:28 AM ET
Charles Niemeier has largely hit the nail squarely on the head.
Instead of acting like Christopher Cox, who does little more than parrot the views of the Big 4 and large multinationals (who value administrative simplicity and lower labor costs over the public interest and try to masquerade those preferences as advancing U.S. "competitiveness"), Niemeier takes a rational and sober approach to the matter.
Its refreshing that somebody has the guts to point out the obvious. Its time for others to insist on piercing the mindless bloviate of IFRS cheerleaders ("robust", "mature") with actual facts.
Not said is the obvious. Like many commercial court cases, U.S. v. Simon was bad law, a vehicle for overzealous prosecuters and a potential landmine for issuers. It seems most likely that adding immature and imprecise foreign standards to the hyperactive U.S. securities bar is a recipe for endless litigation.
Posted by Super Heater | Sep 10, 2008 10:22 PM ET
Under IFRS, would U.S. companies be subject to a foreign enforcement agency? If so, then the SEC is pushing us into a situation where our sovereignty as a nation will be compromised. Otherwise, I don't see anything worthy of freaking out about.
Posted by Spencer Anderson | Sep 10, 2008 9:25 PM ET
I respect Mr. Niemeyer's background but I don't agree that a switch to IFRS undermines the US regulatory system. The SEC, which has had tremendous input into US GAAP, will continue to perform their rigorous reviews of filings regardless of the GAAP used. A US filer that has foreign subs that currently use IFRS will enjoy a cost savings in a switch to IFRS that may lower their cost of capital. Finally, IFRS is less mature than US GAAP and may grow in complexity. If it doesn't become as complex as US GAAP that will make it easier on investors who have to review too much information to make investment decisions.
Posted by Blair Vago | Sep 10, 2008 4:24 PM ET
Finally, someone of prominence and experience has the gumption to publicly state the obvious: the emperor has no clothes.
U.S. adoption of IFRS is purely a political power play, and will do nothing for investors except to harm them.
Posted by Thomas Selling | Sep 10, 2008 1:44 PM ET
The PCAOB member is absolutely correct. The rush to international standards is definitely politically motivated and will spawn financial disasters and scandals that will eclipse the Enron debacle.
Posted by randall enders | Sep 10, 2008 12:51 PM ET
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