Marie Leone, CFO.com | US
March 7, 2006

Disclosure

I am a fan of disclosure in either a rules or principles based environment. However, under a principle based regime, where management discretion multiplies, increased disclosure may provide the best mechanism to combat the resulting new flexibility in choice of accounting policy. In other words, who cares what method is used to account for a transaction, as long as that method is disclosed to the market. Investors, and other related parties such as research analysts, can step in to replace the policing provided by rules, by serving as an Adam Smith invisible hand. This very important check and balance is only possible with a revamped disclosure requirment. Disclosure must increase, where rules retreat.

Posted by Kevin Ness | Mar 13, 2006 11:27 AM ET

Principles Based Accounting

I agree with many comments made in the article, but it stops short of a call for accountability. I have been a licensed C.P.A. for 35 years and the ethics of corporate governance has been deteriorating more rapidly the higher remuneration climbs. Golden parachutes never existed in the first half of my career and they need to be demolished immediately. The corporate shield has protected too many executives from accountability to stockholders and the golden parachute has rewarded many of the most egregious performers. Executives like those at United Airlines are setting precedents in amoral behavior when they have a fiduciary responsibility to fund retirement benefit programs, but they ducked the isssue until cash was too tight to make the payments and let the bankruptcy judge solve the problem by funding the executive benefits and netting the bankruptcy costs against the remaining funds available for the balance of the retirement benefit programs.

Posted by Gerald Hunt | Mar 9, 2006 2:55 AM ET