I'm writing this on the last leg of a truly incredible journey. My wife Karen and I are just landing in Newark after a 24-hour trip home from Sydney, where we attended the International Association of Financial Executives Institutes (IAFEI) annual meeting and world congress. Sydney was in a state of post-Olympic depression. All the shopkeepers were quite bored after a year of intense activity as they prepared for the games. We didn't make it to the games, but the city was still in full Olympic splendor. Bondi Beach was definitely the highlight of our trip, with spectacular scenery in all directions. The "Aussies" kept trying to get me to go for an early-morning surf, assuring me that I was too big and tall for any shark to consider taking a nip. But, I'll bet they just wanted a big decoy, so I passed on the invite!
Pooling and Business
That said, this escalation, which drew a quick and strong response from the FASB, reflects some fundamental flaws in our process. Read their press release here. I asked some of our key FEI leaders to comment on this development. Here are some of their responses, which I provide without attribution, but with their permission.
Member #1 - "I do not like having Congress involved with accounting standard setting. But like the employee stock option model and loan loss accounting (to name a few), the flaw is the process: FASB and the SEC do not consider broader issues when they set accounting standards. In fact, it is not always clear that the standards always improve information to investors. If we wish to support such an initiative, we should address the process and not just the issue. Defining which economic, investor and business issues should be considered and how much weight they should carry vs. the "purity" of the accounting will not be easy. But, the number of times that companies have turned to Congress to resolve disputes with FASB and the SEC in recent years shows the wide-ranging implications their decisions are perceived to carry."
Member #2 - "I agree with Member #1. Congress having to get involved is an indication that the process is not working. I feel that the SEC has insulated the FASB to such a great extent that they no longer feel accountable. I guess this is why Congress has to step in to play that role."
Member #3 - "I too am disappointed that certain members of Congress have been goaded into introducing bills regarding accounting issues. I believe this sort of action further weakens the FASB and ultimately strengthens SEC standard-setting. As much as the SEC touts its requirement to get public input into its rules, we all know that they mandate whatever they want. This situation is best exemplified by SAB 101."
I think we all agree that we can have the most influence on the FASB, and the least on the SEC. Therefore, FEI should continue to give its utmost support to maintaining an independent FASB.
I have to say that I disagree with Member #1. At the end of the day, the best accounting rules are those that are not impacted by certain local, regional, national, or industrial concerns. What's good for the banking industry might not be good for utilities. What's good for Silicon Valley might not necessarily be good for Detroit. And thinking only of U.S. companies will not achieve the ultimate goal of rational and consistent international accounting rules. We don't want the FASB to be in the middle of deciding economic impact. They would progress even slower than Congress!"
Video Interview with Ed Jenkins,
Sir David Tweedie and Tom Jones
Limits of Liability
The report is available at no cost from Marsh by contacting Gail Murray-McCarthy, Marsh Inc. at: Gail.Murray-Mccarthy@marshmc.com.
EITF Resolves Several Stock Option
Job Posting: CFO
For a complete position description of the above job (FEI Job #4980) and to view more jobs, please visit the FEI Career Center.
That's all for now,