They Are the Must Reads

Today I shine a bright light on some blog posts that are not only interesting, but also imaginative and compelling.   More than posts, they truly are articles in the fine tradition of business journalism.   They are examples of a powerful force in accounting news.

In a perfect world, everyone would have a focus on current events.   I recently wrote the following in “Questions From a Future Blogger” (Jan. 14, 2010).

Accounting and/or financial blogs are a big deal. As the world evolves and becomes faster paced, long-lived jobs will disappear. We accountants will adapt by piecing together a career from many project-length opportunities. I believe it will be a matter of professional life or death for accountants to get on top of evolving current events and stay there. For there to be life, we all need to make life-long learning a lifestyle …

How will we learn to think [new] ways and grow our thinking? Independent blogs commentaries like The Summa, and re: The Auditors, and TaxGirl. Blogs provide input to fuel critical thinking, seeds for creating thinking, and energy for practical thinking.

The purpose of today’s installment of The Summa is to bring a few of last week’s best and smartest to your attention.  By doing so, I hope to whet your appetite for the good stories to be written this coming week.  These are the must reads.

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Where Are the Investors?

The principals of the federal government’s regulatory regime–the administration under President Obama, the Treasury under Geithner, the Federal Reserve under Bernanke, and the SEC under Schapiro–have locked arms and stepped out in unison chanting the mantra that the United States should move swiftly and irreversably to a single set of global accounting standards.  But not everyone agrees.

Professors Paul B. W. Miller (University of Colorado at Colorado Springs) and Paul R. Bahnson (Boise State University) write a periodic editorial for WebCPA called The Spirit of Convergence.  In a recent editorial, The AICPA and G-20 on convergence: Lots of supply, not much demand, they pan the rapid push for IFRS adoption because they note the absence of investor desire for the switch.  Surely, they argue, investor desire for such a switch is a necessary precondition for the SEC moving the country in that direction.  In the absence of any discernible investor demand, Miller and Bahnson recommend letting the FASB and IASB move toward convergence at their own pace, if that is possible.

Miller and Bahnson raise a very good question, “Where are the investors?”  The answer is that they absolutely don’t prefer the IFRS over GAAP for the reporting of financial results by American companies seeking capital in the U.S.  Why?  Because IFRS will permit grotesquely inflated earnings by U.S. companies.

Although proponents of a switch continue to state that the primary purpose of world-wide adoption of IFRS is the greater comparability of financial statements from different companies, almost anyone in the world with half a brain snickers at this claim.  Comparability cannot exist when companies can report for similar business events with different accounting treatments as is possible using IFRS’s professional judgment.  Harvey Pitt, former chair of the SEC and IFRS advocate at Compliance Week, states that “… investors will simply have to learn to deal with it.”  It, of course, meaning the varied accounting treatments.  Of course, it also means less informative and more vague financial statements.

But wait a minute!  Isn’t the SEC supposed to look out for the little guy?  The investor?  It says so in the proposed Strategic Plan of the SEC, released on October 15, 2009 (http://www.sec.gov/about/secstratplan1015.pdf),  “The mission of the SEC is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.”  It plans to accomplish this by raising international regulatory standards and cooperation, including working toward improvement of accounting standards in the wake of the credit crisis and the development of a single set of high-quality global accounting standards (key objectives for reform of the financial regulatory system published by the U.S. Department of the Treasury in Financial Regulatory Reform: A New Foundation; June 2009).

Schapiro, Geithner, Obama and Bernanke announcing support for a single set of global accounting standards on June 17, 2009

Does that mean that the federal government and the SEC plan to protect investors by adopting accounting rules that produce less informative and more vague financial statements?   Yes!  Yes!  Yes!

Only in Washingtonian political double-speak is it possible for more to actually mean less, and for yes to actually mean no.  Isn’t this a great country?

Debits and credits, in abundance – – David Albrecht

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Dispelling some more myths about IFRS

[I have removed the name of the Tweeter to whom I responded in this blog post.  He has indicated his displeasure for being named.  Mr. XX, sorry to have mentioned your name in the first place, despite the fact that you are a public persona.]

A fellow with a Twitter account directed some derogatory-GAAP toward me (@profalbrecht).   He did not accept my return comments, so I’m going to blog a response here.  If he had made public his e-mail, I would have responded privately.

Now the issue is, should the U.S. adopt IFRS (or even converge to something close to IFRS).  We are not considering whether Europe should adopt IFRS (it shouldn’t), or whether Nigeria should adopt IFRS (it should), or whether China should adopt IFRS (hart to justify either way).  It is whether the U.S. should adopt IFRS.   Accounting theoreticians (including some of the world’s smartest accounting professors) and American accountants, and American investors say no.

Mr. XX says “Most in world believe principles-based IFRS superior to shut-your-eyes-and-obey-the-rules of US GAAP.”  What I love about IFRS guys is that they pop off with these broad platitudes with absolutely no logic to back them up.  At one time, I said that “No knowledgeable person believes that IFRS is superior for the U.S. than is U.S. GAAP.”  Perhaps I should say that no one has yet justified publicly (or to me) their belief in IFRS superiority for the U.S.  Remember the question is not whether IFRS is superior in general (it isn’t) or if IFRS is superior for Europe (it isn’t), or if it is superior for Nigeria (it is).  [And IFRS is no more principles-based than U.S. GAAP.  To say otherwise is to spout ignorance.]

OK, one more time.  In the U.S. there is a culture of corporate executives taking liberties when it comes to putting out financial statements.  How much liberty?  Well, three times as many business students cheat during college as students of any other discipline, and when they grow up they become corporate executives, large audit firm auditors, and business professors.   And they aren’t any more honest or ethical when grown up (it’s a slippery slope, and people usually go down, not up).  American business executives determine how much is the potential penalty for not following accounting rules (and reporting whatever else they want), and if benefits from not following accounting rules exceed costs (the penalty for not obeying rules–usually civil but in rare occasions criminal), they they go ahead and non-comply (i.e., manipulate earnings).

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Lest I Forget

Accountants have a sharp eye.  They can look through a book of accounts, add up a few numbers, and find the problem with unerring accuracy. ! How do they do that?  And they proudly proclaim the source of the problem to one and all.  Wonder how the source feels about that?

Q:  When was the last time you remember seeing a smiling/laughing accountant?

A:  Sadistic IRS staffers telling jokes about sticking it to lying taxpayers in Stranger Than Fiction, an award winning Hollywood film.

Complaints, criticisms and finding faults.  Yeah.

I had a bad week at the office last week.  One too many complaints.  It shook me up.  Went into a local coffee shop, and Sarah (all coffee tenders are named Sarah, aren’t they?) asked what was wrong?  I had no smile.

I’ll share with you now a lesson learned from years of life experience, it’s better to give than to take.  Last week at the office my smile was taken, and it wasn’t even used by the taker.  Invariably ta-kees become ta-kers (I resemble that).  How much better it would have been for the other to give me a reason to smile.  I would have returned it 100-fold.  Receivers become givers.

My older son Tom wore out his texting thumb trying to cheer me up.  He finally succeeded with a link to the following video.  I am now reminded of advice that I once gave to other professors:  The last thing you should do before entering any classroom is to put a smile on your face. One professor was so taken that he printed and taped the advice to his inside office door in such a way that he would always be reminded before class.

I follow a few tweeters, and they’ve been theorizing about the positive career effect of getting 8 hours of sleep each and every night.  I’m absolutely sure that even more accountant careers would take off and go way way up if the accountant was a smile giver.  Remember, a spoon full of sugar helps the medicine go down.

The following film short will take 16 minutes to be viewed.  You will be a better person if you watch it all the way until the end.

Validation (2007), written by Kurt Kuenne, starring  T.J. Thyne and Vicki Davis.

I’ll keep watching this video, lest I forget again.  Thanks Tom.

Debit and credit – – David Albrecht

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They Still Don’t Get It

The push for IFRS continues on, unrelenting, like the steady flow of the Mississippi River.  We have all noticed it.  Switching the United States from U.S. GAAP to IFRS is desired in the U.S. only by large audit firms, CEOs of large multinationals, and SEC regulators and their staffs.  Investors, rank and file accountants and accounting professors oppose the move.  Audit firm principals and corporate executives stand to profit, one way or another, by billions and billions and billions and billions of U.S. dollars.  It is self-debasing greed.  It is avarice of the corrupted soul.

It reminds me of things mentioned in a speech by Arthur R. Wyatt on August 3, 2003 to attendees of the American Accounting Association national convention:  Accounting Professionalism–They Just Don’t Get it.  Wyatt had an impressive resume:  accounting professor, Arthur Andersen partner, FASB member, IASC member.  He spoke to the annual conference as to why things got so bad that one of the Big 5 went kaput, and it was just happenstance that it did not happen to any of the four survivors.

I think Wyatt considered Arthur Andersen’s fate to be deserved, as he described an historical evolution that resulted in Andersen abandoning its responsibility.  I’m quoting a long passage from his speech that contains his conclusion:

Just as greed appears to have been the driving force at many of the companies that have failed or had significant restructurings, greed became a force to contend with in the accounting firms.  In essence, the cultures of the firms had gradually changed from a central emphasis on delivering professional services in a professional manner to an emphasis on growing revenues and profitability.  …

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Presentations & Other Stuff

Here is a list of my scheduled presentations, as well as the books/videos on my bed stand.

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Tax Benefits for Haiti Donations

I received an e-mail from Rob Pierson, a Democratic Congressional staffer in Washington, D.C., asking if I would get the word out on tax benefits for Haiti donations.  I said yes, so here it is (indented and in green font):

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