In politics you must always keep running with the pack. The moment that you falter and they sense that you are injured, the rest will turn on you like wolves.
R. A. Butler (1902 – 1982)
Politics, n. Strife of interests masquerading as a contest of principles.
Ambrose Bierce (1842 – 1914), The Devil’s Dictionary
Yesterday’s big news–a splash into the cesspool of self-interested politics over accounting standards.

Charles Niemeier, member of PCAOB
The New York State Society of CPAs sponsors an annual conference featuring speakers from the Public Company Accounting Oversight Board (PCAOB). Yesterday, outgoing PCAOB member Charles Niemeier assaulted the SEC push to replace U.S. GAAP with International Financial Reporting Standards (IFRS). In his strongest public comments to-date, Niemeier came out strongly in favor of retaining U.S. GAAP. Two public accounts of his remarks quickly became available
- CFO.com Regulator Rips Into Global Accounting Plan by Marie Leone
- Reuters: Regulator Pans U.S. Move Toward IFRS Accounting by Emily Chasan.
In my opinion, these two accounts are worth a serious read.
Before I became an accounting professor, I received a B.A. in Political Science. This has always given me a different perspective when reading accounting regulation news. Upon first reading about the speech, my first reaction (shared with the accounting professors at AECM) was, “I’m curious as to whether Niemeier’s career as a regulator is over.”
Little did I know that Niemeier’s career has already ended.
Long-time readers of my comments on AECM know that I am no fan of IFRS. Like other accounting professors (Bob Jensen, Tom Selling, Ed Ketz) that regularly comment on financial accounting regulation, I believe that the US investor interest is best served by (1) accounting rules with bright lines, and (2) corporate compliance with these rules. Moreover, I’m on record conjecturing that the U.S. push toward IFRS is motivated by President Bush’s desire to leave American business a parting gift–the less stringent accounting rules of IFRS. Today’s post is about the politics of dissent.
Leone describes Niemeier as, “a vocal critic of the accelerated movement toward adoption of IFRS.” Chasan agrees Is this true? A search turned up one reference to Niemeier’s remarks. On February 8, 2008, Sarah Johnson, writing for CFO.com says in IFRS: No Longer If, but When that Niemeier opposes the rush to adopt IFRS. This article follows SEC Chairman Christopher Cox’s remarks that the SEC was working on a timetable for the switchover from US GAAP to IFRS.
OK, Mr. Christopher Cox, how do you countenance dissent in the ranks?
The next public reference comes in Floyd Norris’s blog at the New York Times. In his blog of August 25, 2008, Is the Accounting Oversight Board Really Independent? Norris reports:
Two of the strongest investor supporters on the original board were Kayla Gillan, who came from Calpers, the activist public pension fund, and Charles D. Niemeier, who had been chief accountant of the enforcement division of the Securities and Exchange Commission.

Christopher Cox, Chairman of SEC
Mr. Niemeier’s term expires in October, meaning the S.E.C. will be able to replace him with another accountant. Barbara Roper of the Consumer Federation of America says she hears that the big accounting firms have hired lobbyists to assure that the post goes to someone from one of their firms, which believe they deserve representation. She does not like the idea, and is urging Mr. Cox to let Mr. Niemeier keep serving until a new S.E.C. chairman is appointed by the next president.
I put in a call to the S.E.C., where a spokesman assured me that there was “a rigorous process” to choose board members but had no specifics on timing.
Are the two events (Niemeier’s dissent and Cox terminating him from PCAOB) related? I’m not privvy to the inside details of SEC politics, but I really wouldn’t be surprised if the dissent had led directly and quickly to the termination. Afterall, it is a truism that in politics, dissenters must be culled from the pack. Correction: When PCAOB was formed 2002, Charles Niemeier received a one-year term. He was appointed to a full five year term in 2003. This term ends in October, and he is not eligible for reappointment. Mr. Cox could allow him to serve indefinitely until a replacement is named. Mr. Cox certainly won’t let him do so, given his previous dissent over IFRS. Nor does Niemeier have any future at the SEC under Cox’s leadership. There is dissent the ranks, and I don’t believe Cox plays well with dissenters. Niemeier is being culled from the pack.
So, enter Niemeier’s final performance on the public stage. Yesterday, on September 10, 2008, he is speaking at the New York State Society of CPAs Current Developments Under the Sarbanes Oxley, SEC and PCAOB Conference. He let’s it all hang out, as in, “Mr. Cox, take this!” Let there be strife and discord!
Niemeier does an outstanding job of assaulting the Cox push toward IFRS. His defense of U.S. GAAP is stirring. Very revealing is Niemeier’s reference to the political motivation behind it. According to Chasan (Reuters),
He warned that the push to adopt IFRS was also politically motivated, citing a 2007 meeting between U.S. President George W. Bush, German Chancellor Angela Merkel and the European Council, where the need for harmonization of accounting rules, and capital markets integration was discussed.
Just as I suspected.
What does this mean? Cox clearly has the power here, possessing the full weight of presidential backing. He is using the SEC to pitch U.S. GAAP in the garbage can. I doubt that anything can be done at this time to derail him and his efforts. Niemeier has been ousted from his position of influence. Yesterday’s remarks will change nothing. I think this to be unfortunate. Only a tidal wave of public opinion can stop the lemming march toward the precipice of IFRS adoption. There will be no such tidal wave. The technicality of accounting rules is simply too arcane for the American public to care about.
Moreover, this episode provides the definitive answer to Norris’s question of whether the PCAOB is really independent. The answer is no. The PCAOB can only march to the tune of one man–Christopher Cox.
Over and out – – David Albrecht
I just notice a review of Niemeier’s speech over at Accountancy Age (AA). AA always has such great headlines.
PCAOB member slams stateside IFRS plans at http://www.accountancyage.com/accountancyage/news/2225854/pcaob-member-slams-stateside