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This is a live blogging exercise. If a coma sets in, as I expect, then this will be a dead blogging experience by 4:00 ET.
Neri Bukspan, Executive Managing Director, Standard and Poor’s. S&P wants everyone, including US, on IFRS.
Gregory Jonas, Managing Director, Morgan Stanley. Supports condorsement.
Mark LaMonte, Managing Director, Moody’s Investors Service. In order to rate 5,000 companies around the world, needs one set of global accounting standards.
David Larsen, Managing Director, Duff & Phelps, also on FASB, AICPA committees. Not the standards, but uniform application of standards. Application of standards can be different around the world. FASB is reasonably insulated from global politics.
Mary Morris, Investment Officer, California Public Employees’ Retirement System. CALPERS is present and involved. ????
Kevin Spataro, Senior Vice President, The Allstate Corporation. Supports single set of global standards.
Gerry White, President, Grace & White, Inc.
Is incorporation of IFRS a good idea?
White – IFRS does not have enough investor representation. Likes condorsement. In some countries, needs of investors not the highest priority.
Jonas – although ideal of single set of global standards, there is great risk. We need to be careful about wholesale adoption. We need to interpret IFRS standards. We also have unique US issues where we need to supplement existing standards.
How do users rely on either GAAP or IFRS?
White – there is no single good way of analyzing IFRS financial statements. You learn about IFRS by doing.
Others – investors have access to so much information, that no reliance on just the financial statements. Focus on cash flows. Investors can adjust particular numbers to incorporate additional numbers, so whether GAAP or IFRS doesn’t matter. CALPERS agrees it doesn’t matter whether GAAP or IFRS in analyzing a company.
Schapiro: is there a risk of diffusion, IFRS applied differently around the world?
Investors – that is a risk.
Jonas – does this mean we shouldn’t adopt IFRS? No, we should still adopt IFRS because it narrows differences, which is good. Some improvement is better than no improvement.
Tricia Malley (Canada) – auditors have a huge impact. All jurisdictions need to resist temptation of providing local interpretations.
Jonas – Much work should be done to narrow interpretations so the information is somewhat consistent. Efforts to reduce variation have been not so successful. IASB needs to work on this. If it won’t do it, a national standard setter needs to do it.
Albrecht – conversation is difficult to follow. There are too many participants to have a flow.
Leslie Seidman – what does investor protection mean to you? How do we know what’s in the best interest of US investors? What should the FASB be doing?
Spataro – investor feedback is that what is being proposed by IASB does not meet needs of investors. But testing needs to be done. But there hasn’t been a standard that has been complete enough so that it can be tested. ???????
LaMonte – carveouts aren’t useful, but carvins are.
White – are investors prepared? Probably not. But giving an additional years won’t help. It is much better to have retrospective adoption (condorsement).
Spataro – IASB needs to have same processes as FASB. If it doesn’t, then that’s a problem.
Morris – investors will be ready to jump in.
Larsen – condorsement is way to go. Don’t need a private company FASB.
LaMonte – US involvement if standard setting is important.
Jonas – only way to protect investors is to bring IFRS in, in a thoughtful way. Condorsement.
Bukspan was difficult to understand.
Participant statements will soon be available on the web site.
11:55 Convening for lunch.
What have we learned so far. Of the invited investor participants, there is a willingness to work in the current world of condorsement. IFRS has decreased world wide variability, but there is so much remaining variability that each number needs to be analyzed and adjusted for its context and for additional information. There is a lot of risk to switching over to IFRS, because the IASB doesn’t yet have the structure, stability, interpretative guidance that American investors want to see.
Will be back at 1:00
Daniel Beck, Controller, Bank of the West - there is inadequate information available at this time. Will companies be held responsible for too little guidance?
Bill Yeates, Partner and National Director of Auditing and Accounting, Hein & Associates LLP – this guy is an auditor. What is he doing on the small business group. Although one set of global standards is desired, the devil is in the details.
Charlie Rowland, Chief Financial Officer, Viropharma – although paying lip service to one set of standards, there is no benefit to his biotech company to switch. From an internal corporate perspective, there is no savings. From a comparability perspective, it will help when compared to Japanese, European companies. However, given so much analyst adjustment, it doesn’t make a difference. There is no short term or mid term benefit.
David Grubb, Partner – Professional Standards Team, Plante & Moran – another audit firm supporting the overall goal of a single set of global accounting standards. Smaller companies don’t have many incentives to switch to IFRS. But must look to the greater good for capital markets. Doesn’t want to see switchover delayed.
Shannon Greene, Chief Financial Officer, Tandy Leather Factory – sees absolutely no benefit to switching to IFRS. The switchover will be painful and expensive. It makes absolutely no sense for Tandy.
Daniel Beck, Controller, Bank of the West – too general.
Is switching to IFRS a good idea, or how should it be done?
Rowland – will there be enough consultants to do all the work? A prolonged implementation will kill us. Time, effort, lack of staff are all problems. Likes condorsement.
Yeates – clients don’t see a any benefit. Prefers a slower approach because the transition will be so comprehensive. He sees a lot of risk to a switch, and doesn’t want to do it any time soon. Type of accounting standard is not a factor in a company going to the capital markets. He doesn’t think it would make a difference to any investor.
What about costs to make the transition?
Rowland – the devil is in the details. Until the details of the standards are settled on, can’t estimate the costs. Don’t ahve a lot of money, so don’t want to make switch in a period of modifying standards. Wants to wait until everything is settled down.
Yeates and Rowland do not want a switch until everything is settled. Yeates would like to see a comprehensive review of all standards before any “big bang.”
Big bang or transition?
Some like plenty of options as to when to do it, others like a “bang” approach. There are drawbacks to a drawn out period of transition. Grubb likes transition, Yeates likes bang. Greene says that putting it off has no impact on her company, as there is not money or time to deal with it until the last minute. Beck says that 25% of the cost of finance department is related to transition.
Seidman – small company role in standard setting?
Various panelists said there is no time and it is too expensive. They don’t see a role.
Other comments – operating in a principles world will be a huge change. Don’t know if they can do it.
Some don’t want to move very fast.
What is the ideal approach?
Stay where they are with no change from GAAP.
Why not let companies that want people who want IFRS use it, but not require it for everyone. Let them do dual reporting.
A certain date is the best way.
Should let the convergence processes go for a while.
No sooner than 3 years.
Beck - supportive of condorsement, and supportive of IFRS.
Break until next panel at 2:45.
I must say that watching this has drugged me into a coma.
What have we learned from the second panel. Small/median businesses generally see no benefit at all to switching. There is a significant current of waiting until all changes have been made to accounting standards before making the switch. Panelists seem evenly split between flexible transition and a big bang.
New panel of regulators. Opening comments
Bryan Craig, Chief Accountant and Director of Audits, Federal Energy Regulatory Commission. Rates charged are based on underlying costs. Currently, tend to use GAAP. A transition would require FERC to study what types of adjustments need to be made. Does not want to see a dual system of GAAP/IFRS.
Rob Esson, Senior Policy Fellow – International Affairs, National Association of Insurance Commissioners – rules are based on GAAP.
Gaylen Hansen, EKS&H, Partner; National Association of State Boards of Accountancy, Director at Large. If IFRS is not superior to GAAP, then what is in it for us? The more relevant question is why? Three concerns: the case has not been made that IFRS is better than GAAP. GAAP historically has been the gold standard. The notion of one universal GAAP is a myth. 120 countries HAVE NOT adopted IFRS. The plan put forward will cause confusion and loss of investor confidence. For too long, preparers have been prioritized over users. There is never a call from investors for IFRS. Suppliers are even having doubts. Secondly, the governance of IFRS must be sound. It must be as independent as FASB. IASB comes up short. Third, costs must be reasonable. Very little has been done to date on costs. Some believe the costs will be struggling. It is unfair to make this switch when the country is struggling economically. Moving to IFRS will create audit firm haves and have nots, with associated risks to independence. We may not know for several decades if this switch is a good idea. NASBA supports FASB, and does not support convergence for convergence sake. Please reconsider the proposal. This is not in our national interest. Why should we do this to ourselves.
Kathy Murphy, Chief Accountant, Office of the Comptroller of the Currency – wants one set of U.S. standards.
Nick Satriano, Chief Accountant, Federal Housing Finance Agency
How do regulatory agencies use accounting standards?
Hansen – two different sets of standards would make enforcement difficult.
Others – accounting based financial statements are heavily used.
Murphy – having dual sets of standard usage would make regulation very difficult.
Should the US switch to IFRS?
Esson – his regulatory rules are aligned slightly more with IFRS.
Hansen – worth exploring. Managers take actions in response to reported numbers. This needs to be looked at.
Debit and credit – - David Albrecht