At the most recent meeting of the SEC's anti-complexity committee, representatives from audit firms argued for their right to continue to issue interpretive guidance. Critics rightly argue that added guidance will flood the already overflowing pools of interpretations floating out there (hence, not exactly simplifying things in the financial reporting realm.)
One member of the committee posited that accounting rules should evolve similar to the common law process. Instead of standards improving through judges' opinions, they could become more developed based on the closed-door sessions between managers and their auditors — if the results of those discussions were to be shared publicly (without naming names, of course), suggested Joseph Grundfest, a Stanford law professor. What would happen if those "interpretations were made public and exposed so that they could be criticized and commented on and literature developed around them?" he asked.
You mean, besides CFOs fainting at such a thought?
Grundfest admitted that such a system might raise fears among executives that peers would think they were idiots for caving into auditors. But Grundfest does raise a good point.
Since the public-company reporting system is supposed to encourage transparency, then why are all the difficult issues "raised, addressed, and resolved in secrecy"? What he didn't address, however, is how this idea would lead to anything more than piles upon piles of new accounting literature.
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