Accounting & Tax

SEC Chairman Mum on Accounting Issues

SEC chairman Mary Schapiro's view of international accounting standards and other accounting questions remains something of a mystery.
Tim ReasonApril 7, 2009

With just two weeks left for the public to comment on the Securities and Exchange Commission’s proposed roadmap for adopting International Financial Reporting Standards, SEC chairman Mary Schapiro’s own views on the topic, as well as some other prominent accounting issues, remain largely a matter of guesswork and speculation.

The roadmap, which would convert all publicly traded companies in the U.S. to IFRS by 2016, was the brainchild of Schapiro’s predecessor, Republican chairman Christopher Cox. Announced with great fanfare last August, the roadmap was delayed by the burgeoning financial crisis and was not officially entered into the Federal Register until Barack Obama’s election had effectively made Cox a lame-duck chairman. In February, under a newly confirmed chairman Schapiro, the SEC granted the wishes of many corporate issuers by agreeing to extend the comment period another two months, until April 20.

During her confirmation hearings, Schapiro expressed concern about the pace of accounting conversion proposed by her predecessor, noting, “I will not be bound by the existing roadmap that’s out for public comment,” and expressing reservations about quality of IFRS and the independence of the International Accounting Standards Board, which writes those rules.

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Since then, Schapiro has rarely addressed accounting, though that reticence that may not be unusual in the case of the IFRS roadmap. “Commissioners generally cannot comment on proposed rules during the public comment period,” says SEC spokesman John Nester.

Still, Schapiro’s silence seemed particularly noticeable last week, when she traveled to London for her first formal meeting as a member of a group of international regulators who will monitor the IASB’s parent organization. While the IASB issued a press release about the event, the SEC did not.

The group, known as the IASC Foundation Monitoring Board, was formed by the IASB’s parent organization, the International Accounting Standards Committee Foundation, in part because of European concerns that the international accounting standards-setters were not accountable to regulators, even though accounting standards are essentially the equivalent of law in many European countries. But the formation of the group also helps the IASB make the case for being a recognized accounting standard-setter under the Sarbanes-Oxley Act of 2002, which requires that the SEC have certain elements of oversight over accounting rulemakers.

Schapiro attended the first meeting of the Monitoring Board and the IASCF trustees along with Monitoring Board members Hans Hoogervorst, head of the Netherlands Authority for Financial Markets; Guillermo Larraín, chairman of the IOSCO Emerging Markets Committee and the superintendencia de valores y seguros of Chile; Junichi Maruyama, deputy commissioner for international affairs of the JFSA; European commissioner Charlie McCreevy; and Sylvie Matherat, representative of the Basel Committee on Banking Supervision.

During the meeting, in introductory remarks lasting about two minutes, Schapiro reiterated the SEC’s commitment to the monitoring board’s creation and its work, but also emphasized its role in preserving the independence of standard setting — an issue for which she has criticized IASB in the past.

Schapiro did reaffirm the SEC’s plan to move to a worldwide system of accounting standards, but continued to project a hesitation about the timetable. “We are also committed to moving ahead with achieving what I think we all believe is the correct goal — over some time frame — and that is a single, universal set of high quality accounting standards for public companies,” Schapiro said. “And the SEC remains committed to moving in that direction and very much committed to the convergence process.”

Yesterday, Schapiro gave a speech to the Council of Institutional Investors about regulatory reform that made no mention of her international trip. In fact, the speech focused almost entirely on governance issues and did not directly mention accounting at all.

Despite a furious debate about whether fair-value accounting is to blame for the economic crisis, Schapiro has yet to appoint a new chief accountant for the SEC, leaving many observers guessing about the Commission’s approach. During the fair-value debate that has raged during her tenure, Schapiro has let acting chief accountant James Kroeker take the lead in testifying before Congress. He has generally defended existing accounting rules, but has not taken a hard stance in defense of any particular accounting approach. “Accounting did not cause this crisis and accounting will not end it,” Kroeker told Congress on March 12. “But,” he added, “accounting should not make it worse.”

Schapiro’s most recent public comments on accounting, on March 26, reiterated the SEC’s longstanding involvement in accounting matters through guidance and review of corporate filings, though she did not refer specifically to the U.S. Financial Accounting Standards Board or IASB.

In recent months, critics of IFRS have been buoyed by rumors that Schapiro’s pick for the chief accountant spot would be Charles Niemeier, a member of the Public Company Accounting Oversight Board and an outspoken critic of IFRS. But the delay since those rumors first surfaced in the press make it seem increasingly unlikely that Niemeier is Schapiro’s pick.