Not surprisingly, Stephen Sherwin, chairman and CEO of Cell Genesys, just complained mightily at the 404um about the cost of complying with Sarbox's much-loanted dicta regarding controls. And Sherwin noted that he was the only representative of the small business community on his panel.
He might also have noted that biotech companies such as his are hardly models of public disclosure, engaging in frequent off-balance-sheet maneuvers to get investors to overlook their substantial R&D costs. Sure enough, Cell Genesys did that in August, 2004, with its R&D efforts for treatments of such diseases as Alzheimer's and ALS (Lou Gehrig's disease) through a partial spin-off of a subsidiary called Ceregene.
There's nothing technically wrong about that, since Cell Geneys owns only 25 percent and thus qualifies for equity treatment under current accounting rules. But Sherwin remains chairman of Ceregene, so it might be argued that Cell Genesys retains effective control over the former sub, and thus should consolidate its results, as it did until the spin-off. That indeed might be what GAAP required if the FASB had prevailed in the attempts it made several times during the past decade or so to change the standard for consolidation, all in the name of principles-based accounting, as I reminded folks just the other day. After all, Sherwin otherwise has a conflict of interest.
So someone ought to ask Sherwin if he's willing to trade a bit of the compliance burden of 404 for a simple principle that would help Sherwin understand whose shareholders he serves, Cell Genesys's or Ceregene's. More than a few investors might want to know, which is why the FASB is threatening to mount the ramparts on this once again.
|
Video
