Is accounting convergence dead?
I surely hope so.
Robert Herz just announced a delay. Here’s how I got it. Bob Herz (current Chair, FASB) sent Denny Beresford (former Chair, FASB) an e-mail. Denny sent it to Bob Jensen (retired faculty, Trinity University). Bob sent it to me:
From: Robert Herz <firstname.lastname@example.org>
Date: Wed, 2 Jun 2010 07:54:42 -0400
To: email@example.com; Norman.Strauss@baruch.cuny.edu
Subject: FW: Reuters Update
Hi Denny and Norm . In case you haven’t already seen this . I will elaborate a bit more in my opening remarks tomorrow . See ya then .
Accounting rulemakers to delay convergence
Tue Jun 1, 2010 3:23pm EDT
NEW YORK (Reuters) – The head of the Financial Accounting Standards Board, which sets U.S. accounting rules, said on Tuesday he does not expect FASB to meet a June 30, 2011 deadline for convergence with international accounting rules, requested by the G20 group of industrial and emerging countries.
The Norwalk, Connecticut-based FASB and the London-based International Accounting Standards Board expect to announce changes to their convergence work plan in the next week or so that would delay the completion date by about six months and allow for greater public comment on the boards’ proposals, FASB Chairman Robert Herz said in an interview with Reuters. …
And, Michael Rapoport (Columnist, Dow Jones Newswires) just called me. Here’s what I told him.
Accounting convergence could still happen. The creation of a single global set of accounting standards is a political solution. World leaders can decide to do just about anything, and they could decide that there should be only one set of accounting standards world-wide. They’ve talked about this (G20 and all that), but politicians are spin masters and past commitments are not always binding.
Accounting convergence efforts should never have started in the first place. That’s because there is no such thing as a neutral accounting standard, or even one set of “the very best possible” accounting standards. All accounting professors have always taught the opposite. Accounting standards all have economic consequences and many affected parties. They will never agree because best for one is worst for another.
Worth inserting (but unsaid during interview): The G20 adopted goal of a single global set of accounting standards is based on an economic assumption that markets are efficient and will be able to see through any accounting disclosure to discern the true economic impact of accounting reports. This is ludicrous. Apparently Paul Volcker has been able to convince a lot of people this is true, but it is false, false, false, false, false, false, false.
Convergence could take place if politicians force it. Politicians do lots of stupid things, and mandating accounting convergence would be only one more in the world’s longest list.
Worth inserting (but unsaid during interview): If convergence is mandated, financial disclosures and auditing will be so messed up that the value of financial statements will be much less than the value of the pdf files they are printed on.
It is impossible for me to fathom how the pieces can ever fit together to produce convergence that makes even a small amount of sense.
The IASB will always cater to European interests in the political process to create accounting standards. American interests will be ignored once the USA adopts IFRS.
Mary Schapiro must feel like she’s on a small boat in the middle of a large ocean, and she must now figure out which way to steer. Like a good political appointee, she pushed convergence when so instructed by the Obama administration. Now the world’s politicians can’t agree on the details of banking regulation, and that has effectively undercut her political support.
Worth inserting (but unsaid during interview): The primary result of the convergence project has been to take a set of perfectly mediocre accounting standards (U.S. GAAP) and messed them all up.
I wonder if he’ll use anything I said.
Debit and credit – - David Albrecht