U.S. official "optimistic" on global accounting move

LONDON Mon Feb 20, 2012 9:54am EST

An illustration picture shows a one Euro coin being melted by a smith in Skopje, December 6, 2011. REUTERS/Ognen Teofilovski

An illustration picture shows a one Euro coin being melted by a smith in Skopje, December 6, 2011.

Credit: Reuters/Ognen Teofilovski

LONDON (Reuters) - A senior U.S. regulator was "optimistic" on Monday about finding a framework for the world's top economy to use global book keeping rules for investors to compare cross-border companies.

"We are hopeful we can put forward a model," James Kroeker, chief accountant at the U.S. Securities and Exchange Commission (SEC), told Reuters.

More than 100 countries, including Europe, use accounting rules from the International Accounting Standards Board (IASB) and are waiting to see if the world's biggest capital market, with up to 12,000 listed companies, adopts them too.

Other heavyweights like Japan would likely follow suit.

Kroeker said the SEC had delayed its decision due the more urgent and heavy work of fleshing out a reform of Wall Street known as Dodd-Frank.

Work on aligning U.S. and IASB accounting rules aimed at paving the way to U.S. adoption has also taken more time, along with a review of IASB governance.

Kroeker said he will make a proposal to SEC commissioners in "coming months" on how the United States could switch, which would spark changes in how the IASB deals with national bodies.

He downplayed the notion of smaller firms being able to opt out indefinitely if U.S. adoption went ahead.

"Having a model that works for everyone, even if there is a delay in timing, is important, otherwise you ingrain the idea that the smaller companies will never have to change and you end up with a two GAAP system permanently in the U.S.," he said.

Kroeker was in London to attend the IASB's advisory council where he gave an update on the U.S. adoption decision.

"I would not want to let a handful of areas that are particularly challenging hold up the broader important decision. There might be ways we need to finesse over time. There will be some areas we might not align on day one," he told the meeting.

MULTILATERAL MECHANISM

IASB Chairman Hans Hoogervorst, under pressure from IASB member countries to move on from years of heavy focus on convergence with U.S. rules, welcomed Kroeker's comments.

"It was a very solid and confidence-boosting statement. I think they are on the right track," IASB Chairman Hans Hoogervorst told Reuters.

To reassure the United States it would still have a strong voice after adoption, Hoogervorst spoke of the need for a new, multilateral mechanism to keep national standard setters like the U.S. Financial Accounting Standards Board (FASB) plugged into the IASB rulemaking process.

"If we only have informal bilateral relations... then the potential for chaos is massive," Hoogervorst told the meeting.

Kroeker said the U.S. would not expect preferential treatment after adoption but there was a need to maintain a strong American voice from the start in IASB rulemaking.

"Multilateral agreement would be important and involvement early on would be critical," Kroeker said.

A multilateral mechanism could also deal with remaining differences between national and IASB rules after adoption.

"It does leave open the possibility that there are some areas where we will have to continue over time to narrow the differences," Kroeker said.

FASB could decide not to apply an IASB rule that "does not improve financial reporting for U.S. investors," Kroeker added.

After Kroeker makes his proposal, SEC commissioners will likely hold a public consultation ahead of a vote, perhaps later this year. Any U.S. adoption would likely be over several years.

World leaders, including U.S. President Barack Obama, called in 2009 for a single set of global accounting rules to improve transparency for investors and regulators.

(Reporting by Huw Jones; Editing by Helen Massy-Beresford)

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Comments (3)
Harry079 wrote:
“World leaders, including U.S. President Barack Obama, called in 2009 for a single set of global accounting rules to improve transparency for investors and regulators.”

They have at least 2 sets of rules when it comes to anything else what makes them think this is going to do anything if some company wants to hide something?

Feb 20, 2012 12:20pm EST  --  Report as abuse
AdamSmith wrote:
The Financial Accounting Standards Board (FASB), for many years, was a respected institution. Its rules required “Mark to Market”.

Mark to Market means that if a company (e.g., a bank) holds instruments (shares or bonds) of another company, then its books must show those instruments at cost, even if their value on the stock ticker, as of today, is higher.

But if their value on the stock ticker today is Lower than what the company paid for them, then they must “mark them to market”.

In other words Mark to Market illustrates another crucially important age-old accounting principle: Conservatism. The main purpose of an accounting system is to serve the interests of the investors that own the company, not the managers of the company. Inflated, exaggerated unrealistically high values for assets on its books do not help the investors make good decisions. Good, realistic, wise, efficient investor decisions are facilitated by accounting conservatism, and Mark to Market.

But today, FASB, to the deep shame of the accounting profession, has caved in to Congress and Republican lobbyists. FASB no longer requires Mark to Market. That means all the trillions of dollars of toxic, sub-prime Collateralized Debt Obligations on the books of American companies and banks are carried at their original inflated cost values, rather than being marked down to market.

Thus the financial stucture of America is full of dead, decaying, festering tissue. Kicking the can down the road, because the FASB abandoned their professional obligations, and dropped the age-old rule of Mark to Market.

Europe? I’m not sure what their rule is. But seeing that Europe, too, is ruled by the wealthy, who also socialized their own losses, I’m pretty sure they’ve politically corrupted their accounting standards, too.

I would enjoy hearing from anybody who knows it they have.

Feb 20, 2012 12:39pm EST  --  Report as abuse
Would this be a good time to buy shares in Raytheon? Seems there’s about to be an order placed for a brand new giant microwave oven to cook the world’s books.

Feb 20, 2012 12:57pm EST  --  Report as abuse
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