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Posts Tagged ‘Niemeier’

I don’t know how much credibility to attach to the following reports from the UK’s GAAPweb.

The first, dated Monday, June 8, claims that sources close to EU politicians are suggesting that the EU have its own standard setting body.  The second, has a brief recap of a meeting between Tweedie and Council of the EU, in which McGreevy claims that some EU politicians question if the IASB is out of touch.

In my opinion, in these reports, reporters are just message carriers.  They reflect real political concern in Europe about the IASB.  Since I’m not over there talking with politicians myself, I can’t judge how much juice these rumors have.  There is enough smoke, however, to make me conclude that the EU dropping IFRS is a reasonable possibility.  It is way too early to tell if it is probable.

The major factor working against the IASB is its independence.  The EU wants the IASB to be independent of everyone but Europe.  The EU wants the  IASB to be subservient to Europe’s wishes. European politicians just have to be getting tired of lobbying in the financial press for certain provisions in IFRS.  It would be much easier if Europe had a standard setting body that answered directly to Charlie McGreevy, Finance Minister.  The result would be more acceptable standards and less debate in the public spotlight.

There have been other interesting things that have come out.  Tom Selling has a very interesting blog post today, in To Catch a Chief Accountant, in which he confirms my suspicion that the tide has turned against IFRS in the US.  If so, Charley Niemeier and Jack Ciesielski are more likely candidates than previously thought.  I wonder, though, if Jane Adams is still the favorite. She doesn’t have the Big-4 ties, although she does have AICPA work.  Her view on IFRS is completely unknown, as she has not spoken publicly about it.

The controversy over IFRS has both sides pushing with everything they have.  The final decision will be political.  I think it likely that the flexibility of IFRS principles/guidelines will largely be lost as a result of all the politics.  Accounting standards will inevitably become more like hard and fast rules, the result of hard fought political compromises. Both sides (national GAAP vs. IFRS) will argue for clearly defined rules, to limit gains from the other side.

Debit and crecit – – David Albrecht

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Chairman Mary Schapiro
SEC
100 F Street NE
Washington DC 20549

Dear Chairman Mary Schapiro,

With this letter I indicate my support for Charles Niemeier for Chief Accountant of the Securities and Exchange Commission.

I am accounting professor and a self-described accounting theorist.  I have closely followed the Securities and Exchange Commission, the Financial Accounting Standards Board, the Public Companies Accounting Oversight Board and the International Accounting Standards Board for some time.  As a result, I became aware of the extraordinary qualifications of Mr. Niemeier.

The Chief Accountant, America’s First Accountant, establishes and maintains U.S. government policy with respect to the FASB, PCAOB and IASB.  Charles Niemeier is uniquely positioned as having prior experience with the SEC and PCAOB, and having worked with the FASB and IASB.  An appointment as Chief Accountant will serve to help him leverage all aspects of his past to move the U.S. forward in very difficult and perilous times.  There is no person today in government accounting regulation/standard setting in whom I have as much trust and respect as Charles Niemeier.  He is the person best qualified to move the U.S. forward with respect to accounting.

I believe that his primary qualification is his great mind that enables him to think in terms of a very broad world view.  His ability to discern trends and understand difficult issues, integrate them, and then correctly reason through to necessary remedies and actions is very special indeed.  In the past 15-20 years, the only other great accounting mind (outside of academia) that comes to mind is Dennis Beresford, former chair of the FASB and now accounting professor at the University of Georgia.   Niemeier’s speeches are well-researched and very insightful.  Some are required reading for my accounting majors.

Not to be overlooked is his dedication to the American investor. There is not even the hint of a suggestion that he has ever acted to advantage corporate interests over those of investors.  Moreover, he is as pro-regulation as anyone I’ve ever come across.  His September 18, 2007 speech to a NYSSCPA conference is the best defense I’ve seen about how strong regulation enhances the U.S. cost of capital advantage in world corporate markets (http://www.pcaobus.org/News_and_Events/Events/2007/Speech/09-18_Niemeier.aspx).

Another qualification he possesses is the respect and admiration of the U.S. world of accountants.  His September 10, 2008 speech to NYSSCPA  (http://www.pcaobus.org/News_and_Events/Events/2008/Speech/09-10_Niemeier.aspx) generated headlines around the world, literally.  It generated dozens of comments by conference attendees as the best defense of U.S. GAAP ever heard.  Quite honestly, it is this national respect that makes him such a serious candidate for Chief Accountant.

He has the respect and love of his staff.

It has been mentioned in the press that he is the anti-IFRS candidate for Chief Accountant.  Given his background, I think it better to say that he would work toward accounting convergence as long as the convergence did not disadvantage American investors in any way.  Some have suggested that your predecessor along with the FASB chair sold out U.S. accounting far too cheaply.  This will never happen under Charles Niemeier.  An additional factor is that many of his views are similar to yours.  For example, he favors U.S. inspection of foreign auditors that serve U.S. companies, just as you do.  I’m sure that the two of you will form a great, great team.

I’ve read every word you’ve spoken and written during the confirmation process and after.  I am becoming convinced that you will be an outstanding Chairman of the SEC.  If you are serious about making accounting the best it can possibly be in the U.S., then I’m sure you should appoint Charles Niemeier as Chief Accountant.

Sincerely,

David Albrecht, Ph.D., CPA
Associate Professor of Accounting
Bowling Green State University
https://profalbrecht.wordpress.com
albrecht@profalbrecht.com

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Four news sources are reporting that Charles Niemeier is being considered for Chief Accountant of the Securities and Exchange Commission.   This is outstanding good news!

First, what is being reported:

I am surprised, however, that CFO Magazine doesn’t have it.  In my opinion, CFO has the best reporting on current events in accounting (Accountancy Age has the best reporting in Europe).   Tim Reason (CFO editorial director) is first rate.  He has impeccable journalist credentials.  If he’s not reporting it yet, then it isn’t definite yet.  Also to weigh in is Floyd Norris, the most highly respected journalist from the New York Times.

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.

Charles Niemeier, new Chief Accountant?

Charley Niemeier was my choice for SEC chair.  President Obama gave it to Mary Schapiro, instead.   This may work out to everyone’s advantage.  A Schapiro/Niemeier team is, in my opinion, very strong. Mary Schapiro has acquitted herself very well in her public appearances immediately before and after her confirmation.   Her trying to invigorate the SEC with new blood is playing well in the press.

Niemeier’s appointment seems to be Mary Schapiro’s way of making a statement about (1) integrity, and (2) IFRS.  During her confirmation hearing testimony, she testified that she was not sold that IFRS is the way to go.  She followed this up with some written comments that were more negative towards IFRS.   Niemeier is on record as a strong critic of IFRS, at least so far as currently constituted.

If Charley Niemeier is appointed as Chief Accountant of the SEC, then it is a master stroke by Mary Schapiro.  There is no better person to head up accounting policy at this (or any) time.  Niemeier is that good! Charley Niemeier will excel as Chief Accountant because he has such a great mind, the best mind in the government field of accounting regulation.  He has a grasp of the big picture, an absolute necessity for Chief Accountant.

I will sleep much better tonight after hearing of this possibility.  If he actually receives the appointment, I will sleep much better for the next few years.

I believe this is Charley Niemeier’s best career move to create a lasting legacy in the regulatory field.  It is no secret that he has had numerous opportunities floated his way as he winds down his final days on the PCAOB.   I need to go over the SEC chair history again, but I don’t think that an accountant has ever been appointed chair of the SEC.

Mary Schapiro, I beg of you.  Please name Charles Niemeier as the Chief Accountant of the SEC.

Over and out – – David Albrecht

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Mary Schapiro testifying before Senate Committee on Banking, Housing and Urban Affairs

Mary Schapiro testifying before Senate Committee on Banking, Housing and Urban Affairs

Yesterday brought a very big piece of news.  Mary Schapiro appeared before the U.S. Senate Committee on Banking, Housing and Urban Affairs.  A video of the appearance is here.    Here is my best attempt at transcripting the most relevant part of the hearing.

Senator Jack Reed (D-RI): Much of what you are going to do will have complications and consequences overseas as well as here in the United States, and one of the areas is IFRS road map.  We have repeated written to Chairman Cox, who tried to determine and develop a very deliberate road map, and I think there’s a rush to judgment on this issue.  In fact, I met witih the CEO of the Honeywell Corporation who has similar concerns over disparate treatment under international rules thata can be used to change income, that can be used to state R&D expenses differently.  There’s a host of … an opportunity for arbitrage between the two systems that I think we have to avoid.  Can you give us a notion of how you wish to proceed with this international accounting with recognition that eventually we’ll have that in a global economy and hopefully we will converge to a set of high level standards.

Mary Schapiro: Well, I would proceed with great caution so that we don’t have a race to the bottom.  I think we all can agree that a single set of accounting standards used around the world would be a very beneficial thing, would investors to compare companies around the world.   With that said, I have some concerns with the road map that has been published by the SEC and is out for comment now.  I have some concerns about IFRS standards generally.  They are not as detailed as the U.S. standards.  There’s a lot left to interpretation.  Even if adopted, there will still be a lack of consistency,  I believe,around the world on how they are implemented and how they are enforced.  The cost to switch from U.S. GAAP to IFRS is going to be extraordinary, and I’ve seen some estimates that range as high as $30 million for each U.S. company in order to do that.  This is a time when I think we have to think carefully about whether we impose those sorts of costs on U.S. industry, really make sense.  Perhaps my greatest concern is the independence of the International Accounting Standards Board and the ability to have oversight over their process as they make standards and the amount of rigor that exists in that process today.  So, I will tell you that I will take a great big breath and look at this entire area again, carefully, and will not necessarily feel bound by the existing road map that is out there for comment.

First of all, I am so happily surprised  that Mary Schapiro made these comments.  They are more protective of U.S. GAAP than I ever imagined would come out of the Obama administration.  I am grateful that the IFRS opposition apparently has been listened to, even though it has not been properly understood.  Welcome aboard, Mary Schapiro.  I hope that you frequently read The Summa for advice on how to handle the IFRS issue.

Her statement, coming during the confirmation process, is not binding.  However, it does give U.S. based opponents of IFRS some hope.  There seems to be an open mind in the Obama administration, that is very good news!

Her statements, however, cannot be considered binding  for three reasons.  First, it could simply be posturing in order to ease concern over her nomination so that she can gain confirmation.  Is this a possibility?  Of course.  Paid $3 million per year to head the NYSE/NASDAQ self-relatory group, her FINRA investigated and failed to catch the  $75 billion Madoff fraud.  Moreover, several key national publications have come out against her confirmation.  She will be confirmed, of course, because Republicans are going to fight a different nomination and not hers.  Never-the-less, she could simply be posturing to gain votes for confirmation.

Second, I don’t think she will have the authority to make the final call over IFRS.   IFRS adoption is an international political issue, and U.S. adoption will be negotiated at the international state level.  It is very possible that the U.S. could bargain away GAAP in order to gain European help to relieve our troops in the Middle East.  Under this scenario, investor protection in the U.S. simply is irrelevant.  National security is the key, and with Obama promising to run up trillion dollar deficits, he will want to save money by bringing home the troops.  Plus, one additional factor.

Third, as I’ve written before, Obama is relying on economists, such as Paul Volcker, for guidance on regulation-related matters, such as accounting standards.  Volcker has been a member of the IASC parent organization for the IASB.  He has been strongly in favor of the U.S. switching to IFRS, for a long time.  He will do everything possible to bring about IFRS in the U.S.  Of course Volcker is out of his depth here, having no background in accounting or finance, and really does not understand the nuances of the issue.  But that isn’t going to stop him.

However, there is no use in saying the sky is falling.  I’m going to take Mary Schapiro at her word and proceed as if the GAAP-IFRS issue is still open.  I have a few comments about her specific words.

First, she says, “I think we all can agree that a single set of accounting standards used around the world would be a very beneficial thing, would investors to compare companies around the world.”  Well, we can’t, because I don’t, nor do others.  One need only to read Shyam Sunder’s work to realize international differences in accounting standards are good.  Countries have different interests, and it is simply ignorant thinking to presume that a single set of standards can satisfy the very different interests that are out there.  For example, the U.S. places a high priority on protecting the investor, and this is reflected in the great amount of detail in our rules.  However, not everyone agrees to that priority.  Nor should they.  Different priorities and national interests will lead naturally to different accounting standards.  This is fundamental and we cannot trust Mary Schapiro to protect U.S. GAAP until she acknowledges it.  No matter what else she says, if she doesn’t get this point then she her thinking is compatible with Paul Volcker, the IFRS champion.

Second, her additional comments sound pretty good.  She seems to be well read.  Don’t know if she’s only read Charley Niemeier, or whether she’s read the other six critics of IFRS.  But at least she has comprehended some of the arguments.  Never-the-less, everything here must be interpreted in the context that she believes a single set of world-wide accounting standards would be beneficial and is attainable.  As I said before, it is not necessarily beneficial, and I’ve argued for a long time that it is unattainable.  For her to continue down this road is simply wasted thinking.

Third, she expresses a desire for the SEC to have oversight with respect to the IASB accounting standard generating process.  Well honey, every other country in the world is going to want to have the same oversight desires.  It seems clear that you want some control over the process, but everyone else wants that also.  Why, Europe has already exerted that control with respect to forcing certain changes to the fair value standard.  Let’s get this straight–the SEC will never, ever, get the degree of oversight it desires with respect to IFRS.  I believe that this should be sufficient to bury the IFRS issue forever.  I don’t even know why you are going to spend time on it.

I’m still going to submit a comment to the SEC on Cox’s proposed road map. And I’m going to continue to write about the benefits for the U.S. to retain GAAP.  If it weren’t for international politics, it would be a no brainer.

Debit and credit – – Dave Albrecht

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This is part two of an eight part series in which I review the seven IFRS critics (Sunder, Niemeier, Ball, Ketz, Selling, Jensen & Albrecht) of whom I am aware.  The series continues over the next two weeks on regular posting dates, MWF.

Charles Niemeier, member of PCAOB

It has now been 30 days since Mr. Niemeier’s really big splash.  The New York State Society of CPAs sponsors an annual conference featuring speakers from the Public Company Accounting Oversight Board (PCAOB).  On September 10, 2008, outgoing PCAOB member Charles Niemeier assailed the Securities and Exchange Commission (SEC) push to replace U.S. generally accepted accounting principles (GAAP) with International Financial Reporting Standards (IFRS).  In his strongest public comments (pdf version) to-date, Niemeier came out strongly in favor of retaining U.S. GAAP.  Two public accounts of his remarks quickly became available, along with two commentaries:

Before analyzing his speech, I’ll say a few words about his background.  (more…)

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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

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.
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