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James Kroeker

An hour ago, the SEC announced that James Kroeker, Chief Accoiuntant of the SEC, is stepping down.  Here is the complete text of the announcement.

06/20/2012 03:43 PM EDT

FOR IMMEDIATE RELEASE
2012-116

Washington, D.C., June 20, 2012 — The Securities and Exchange Commission today announced that Chief Accountant James L. Kroeker will leave the SEC in July to enter the private sector.

Mr. Kroeker came to the SEC in 2007 as Deputy Chief Accountant and has been the agency’s Chief Accountant since January 2009. In that role, he has guided the operations of the SEC’s Office of the Chief Accountant and counseled the Commission on a wide range of accounting and auditing issues.

“Jim has provided superb counsel on a range of accounting and auditing related matters and has always stressed the importance of accounting to our investor protection mission,” said Chairman Mary L. Schapiro.

Mr. Kroeker said, “It has been a unique privilege to be a member of the Commission’s staff during this truly unprecedented time and to have had the opportunity to work alongside the talented and dedicated individuals in the SEC’s Office of the Chief Accountant and across the Commission.”

At the SEC, Mr. Kroeker served as staff director of the agency’s study of fair value accounting standards, which was mandated by Congress in 2008, and led the efforts of the Office of the Chief Accountant to improve off-balance sheet accounting standards. He also guided the Commission’s efforts as it continues to consider convergence of U.S. and international accounting standards.

Before joining the SEC staff, Mr. Kroeker was partner at Deloitte & Touche LLP, most recently serving in the firm’s National Office Accounting Services Group. From 1999 to 2001, Mr. Kroeker served as a Practice Fellow at the Financial Accounting Standards Board.

Debit and credit – – David Albrecht

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James Kroeker, the SEC’s chief accountant, spoke to the AICPA on Monday.  He said,

We remain committed to completion of a final comprehensive report on [IFRS] … the staff will need … a few additional months time to produce a final report. At the same time, the staff is in the process of developing an approach for Commission consideration.

I’m shocked.  What is the SEC waiting for?  President Obama has already promised the G-20 to move the U.S. to complete IFRS adoption.  The SEC is on record as committed to moving the U.S. to global accounting standards.  And Kroeker probably dreams of getting an IFRS tattoo.

Message consistently delivered by current and former IASB chairs.

I know Tom Selling at Accounting Onion keeps writing that there is still hope for derailing the IFRS Express, but I doubt it.  The reason for doubt is SUMMArized in the image to the right —->

Kroeker also said the SEC should, “Provide for and facilitate a strong U.S. voice in the process of establishing global accounting standards.”

Yeah, right.  I know what Hans, Ian, and the IASB have to say about that.  Can’t print it here, though.

Did you notice that the FASB and the FAF escaped mention?  They are already an afterthought.  In the new world of accounting standard setting, it will be the SEC calling the American shots.

I sense a power struggle going on between the SEC and the IASB, and I suspect it is the only reason why the SEC is asking us for “just a little more time.”

Meanwhile, I remain committed to defeating the movement to adopt IFRS in the USA.  IFRS has the worst set of rules imaginable for the US.  I hope we never have to use them.

Debit and credit – – David Albrecht

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A single set of global accounting standards, rules to be followed by any public company as it reports annual operating results, has become the  Holy Grail of Accounting.  In today’s world, these rules are embodied in International Financial Reporting Standards. Unfortunately for many good but unwitting people, advocating the U.S. adoption of IFRS is a fool’s errand.   To more fully understand the ramifications of this statement let’s turn to the dictionary for a basic frame of reference.

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Edith Orenstein, in her exceedingly well done FEI Blog, quotes SEC Chief Accountant James Kroeker as saying:

Kroeker outlined six general areas that the SEC would have to “carefully consider … fully understand and address” regarding the potential use of IFRS by U.S. companies.  He added that this list is not all-inclusive. The six areas are:

  1. U.S. Investor understanding of and perspectives on IFRS;
  2. The development and application of IFRS for use as the single set of globally accepted accounting standards for U.S. issuers;
  3. The impact on the U.S. regulatory environment;
  4. Preparer considerations, including, among other matters: changes to accounting systems, changes to contractual agreements, corporate governance considerations, and litigation contingencies;
  5. Human capital readiness; and
  6. The role of the FASB in achieving the goal of a single global standard.

Kroeker noted, “I expect that you will hear more from us on this topic in the near term.”

James Kroeker

It is so depressing to hear James Kroeker speak of #2 and #6, as it reveals the SEC’s continued fixation on a single global set of accounting standards.

A global accounting standard is both unwise and misguided.  I’ve explained why many times.  However, just in case today is the day Mr. Kroeker checks out my blog, I’ll explain it again.

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I’ve done a little research on the final candidates for Chief Accountant at the SEC.  Tom Selling of the Accounting Onion has handicapped the candidates in yesterday’s post, Handicapping the Chief Accountant Contest.  It is worth a look.  I lack enough inside contacts to be able to offer an opinion as to each candidate’s chances. However, I can rate each candidate on the major issue confronting U.S. accounting–whether or not to switch to IFRS.

Jane B. Adams, labeled the front runner by accounting pundant Tom Selling she is rated as having a 50% probability of being chosen), has some, but not a lot of, prior SEC experience.  She served as Deputy Chief Accountant in the U.S. Securities and Exchange Commission’s Office of the C hief Accountant from 1997 to 2000.  She was also Director of Accounting Standards at the AICPA from 1996 to 1997 and a Project Manager at the Financial Accounting Standards Board from 1987 to 1996. Recently, she has been a member of the user community as an analyst in equity research: 2 years in sell-side equity research at CSFB as Director of Accounting and Tax Policy and the last 6 years on the buy-side at Maverick Capital.  Maverick invests globally in liquid, primarily larger cap, equity securities based on in-depth fundamental research.  She was contributed less than $2,000 to President Obama’s campaign.

In a brief 2001 paper, Identical Companies, Different Financial Statements, she comments about a proposed accounting standard on derivitives, “Such changes do not improve the quality of earnings if they provide substantively different accounting results for the same instrument and exposure.”  From this statement, it is possible to project that because of IFRS flexibility in accounting standards she might oppose their adoption in the U.S.  However, she has made no public comments in the past eight years, so far as I can see.  Although I have no proof, my inclination is to rate her as IFRS friendly, given she has worked on analyzing global companies trading in numerous international markets.

Wayne Carnall, currently chief accountant of the SEC’s Division of Corporation Finance and a former partner at PricewaterhouseCoopers, is touted by Selling as having a 40% chance of being selected.  Carnall, given his lengthy association, is thought to be  big firm candidate.  He has been assigned on numerous occasions to explain the proposed SEC roadmap.   Supporting IFRS and moving toward a single global accounting language seems consistent with his background and public comments.

James Kroeker is acting SEC chief accountant and a former partner at Deloitte & Touche.  After reading numerous comments and reviews of his speeches, it seems clear to me that he is an IFRS advocate.  Although he seems to prefer a complete turnover to IFRS, he has suggested that adopting some, but not all, of IFRS would be a plausible first move.  Selling rates him as having an 8% chance of being named.

Jack Ciesielski and Charley Niemeier are definitely not IFRS proponents.  I cannot find evidence that either will support a single world standard, let alone a move to IFRS.  Both favor strong accounting standards, tight regulation and vigilent enforcement.

SEC Chair Mary Schapiro certainly has choices.  On one end of the continuum would be Ciesielski and Niemeier, who favor tight regulation, U.S. tailored accounting standards and protection of investors.  On the other end are Kroker and Carnall, who have strong ties to the traditional big firm establishment.  They seem willing to promote the big firm party line on IFRS and other issues.  Adams seems to be the compromise candidate but is inexperienced.

Debit and credit – – David Albrecht

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It has taken an extremely long time for SEC Chair Mary Schapiro to decide on a Chief Accountant.  It is rumored that she is about to name her choice.   It has been passed along to me by a trusted source that the short list of candidates for SEC Chief Accountant includes:

  • Jane B. Adams, a former deputy chief accountant of the SEC and former longtime staff member of the Financial Accounting Standards Board, who worked until recently at Maverick Capital, New York.  Ms. Adams was a financial contributor to the Obama campaign.
  • Wayne Carnall, currently chief accountant of the SEC’s Division of Corporation Finance and a former partner at PricewaterhouseCoopers.
  • Jack Ciesielski, president of R.G. Associates, Baltimore, a current member of the Financial Accounting Standards Board’s Investors Technical Advisory Committee and veteran of several standard-setting panels, who also is publisher of Analyst’s Accounting Observer.
  • James Kroeker, acting SEC chief accountant and former partner at Deloitte & Touche, who joined the SEC staff in early 2007 as a deputy to former Chief Accountant Conrad Hewitt.
  • Charles Niemeier, a member of the Public Company Accounting Oversight Board and former chief accountant of the SEC’s Division of Enforcement.  Niemeier has chosen to remain completely independent from partisan politics.

ELVISThe accuracy of this list is not confirmed, and probably should be accorded no more credibility than rumors of an Elvis sighting.

It is my belief that Niemeier was an early front runner, but heavy lobbying prevented his naming.  Charlie McGreevey–European Union Treasury Minister– is rumored to have sent a personal envoy to Washington and an audience with SEC Chair Mary Schapiro to argue his case against Niemeier.  The large accounting firms and AICPA also lobbied strongly against him.   Niemeier caused strong opposition because of his September 10, 2008 speech against U.S. adoption of IFRS.  Schapiro is rumored to have said, “With so much opposition I simply can’t appoint him.”  It is precisely because of that opposition that he should have been appointed.

Tom Selling, consultant and author of The Accounting Onion, has conjectured about odds of appointment on AECM, the listserv for Accounting Professors:

  • Adams: 1:1 (even money)   The right background; may not have staked out a position on IFRS yet; would be the first woman chief accountant.
  • Carnall: 3:2   Perhaps the world’s most knowledgeable person on foreign private issuer matters. Nice guy, could be a very popular choice with the SEC Staff (just guessing on that).
  • Ciesielski: 99:1   Same political baggage as Niemeier (see below).
  • Kroeker: 23:2   Don’t know him. Association with the Cox/Hewitt era could be a plus (political compromise), or a minus (guilt by association).
  • Niemeier: 99:1  Much too candid, rigorous in approach, and independent-minded.

Who know if this is an accurate handicapping?

The Chief Accountant of the SEC has a tremendous influence on accounting policy in the U.S. In essence, the Chief Accountant is responsible for the strategic directions of all matters related to accounting and auditing. In essence, he is the First Accountant of the United States. He is at the center of the accounting universe. Specifically, the Chief Accountant is responsible for:

  1. Oversight of the FASB as it develops and maintains U.S. GAAP.
  2. Oversight of the PCAOB is it regulates auditors and develops and maintains audit/auditor standards.
  3. Coordinating U.S. relations and communications with international organizations that have an impact on accounting standards and practices.

It will be a real shame if Charley Niemeier is not appointed.

Debit and credit – – David Albrecht

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