June 04, 2009
FASB Chief Not Pleased About Proposed IFRS Changes
Financial Accounting Standards Board (FASB) Chief David Herz, has expressed displeasure about the proposed changes to IAS 39 Financial Instruments. A big concern to US standard setters is that US accounting standards are not subject to political pressure. Herz believes that recent proposed changes to IAS 39 are yielding to political pressures to make bank financial states appear more positive.
An article published by Reuters discusses these points.
Excerpts are here:
"The U.S. body said it won't be shoehorned into change.
"We desire to get to a common good answer with the IASB and we will make best efforts to do so, but some of the directions we are currently headed in are not to the liking of our board," FASB chairman, Bob Herz, told a meeting of the Financial Crisis Advisory Group."
Does not look good for a new version of IAS 39 for this year. Maybe cooler heads will prevail on this topic. We will see how it shakes out.
But let's face it, many people wonder why the IASB cares so much about what the US thinks on IFRS when the current US administration has shown no interest in the IFRS Roadmap. They seem to have enforcement on their minds not convergence on accounting standards. The current administration has shown more of a leaning toward protectionism in its latest budgets and policies. So it would not be surprising to see little interest in trying to become more involved in world standards instead of a US centric view.
US companies would find IFRS less costly to utilize on an ongoing basis and less oriented towards rules and more principles based.
If your company is moving to IFRS and needs a cost effective solution, and wants to do it in a sensible and cost effective way, contact http://www.ifrspartner.com/ for more information on IFRS Partner® for companies beginning their conversion efforts. To find out more about events demonstrating these solutions, see http://ifrspartner.com/pages/events.htm
An article published by Reuters discusses these points.
Excerpts are here:
"The U.S. body said it won't be shoehorned into change.
"We desire to get to a common good answer with the IASB and we will make best efforts to do so, but some of the directions we are currently headed in are not to the liking of our board," FASB chairman, Bob Herz, told a meeting of the Financial Crisis Advisory Group."
Does not look good for a new version of IAS 39 for this year. Maybe cooler heads will prevail on this topic. We will see how it shakes out.
But let's face it, many people wonder why the IASB cares so much about what the US thinks on IFRS when the current US administration has shown no interest in the IFRS Roadmap. They seem to have enforcement on their minds not convergence on accounting standards. The current administration has shown more of a leaning toward protectionism in its latest budgets and policies. So it would not be surprising to see little interest in trying to become more involved in world standards instead of a US centric view.
US companies would find IFRS less costly to utilize on an ongoing basis and less oriented towards rules and more principles based.
If your company is moving to IFRS and needs a cost effective solution, and wants to do it in a sensible and cost effective way, contact http://www.ifrspartner.com/ for more information on IFRS Partner® for companies beginning their conversion efforts. To find out more about events demonstrating these solutions, see http://ifrspartner.com/pages/events.htm
February 06, 2009
SOX 404 Delays Caused Increased Fraud in Smaller Public Companies
My experience as a Certified Internal Auditor and working with clients on SOX 404 and the Canadian equivalent NI 52-109 over the past six years, has made me a firm believer that fraud exists in most companies. It is just a matter of how big the fraud, how pervasive and whether it will be detected. A study that was released just today from the firm Lord & Benoit supports this conclusion.
An excerpt is here:
"Lord & Benoit, a Sarbanes-Oxley (SOX) research and consulting firm, just released The Tipping Point: Collision of Relaxed Regulation, Small Business and the Economy, a White Paper snapshot of the current economic, ethical and political environment for small business SOX compliance in the new Obama Administration. The Tipping Point provides a sobering post-mortem case study of a small, high technology public company that, according to a well-informed financial insider, "could have been saved if it had been complying with Section 404." The company, which received millions of dollars in investor capital during years of SOX deadline extensions, filed for bankruptcy and left a painful trail of financial destruction among investors, employees and suppliers."
The other interesting point the article makes is that fraud tends to increase in times of economic decline, for a lot of reasons. The new SEC Chair Susan Shapiro is a believer in the increased regulations of public companies and intends to push through SOX 404b this year. Makes sense since the original regulations were enacted in 2002. With all of the delays, many companies have not been taking the regulations seriously.
When I hear ( and I do frequently ) that these types of regulations are garbage and just busy work, this makes me think that the people uttering these remarks do not take the regulations and their implementation seriously. The regulations in fact try to have the issuers take responsibility for ethics as well as financial controls. So if ethics are "crap" then we are all in trouble.
In this prescriptive world of regulations, the business leaders need to take back the high ground and re-institute an ethical culture and stop the habit of complaining about regulations that are supposed to assist in high ethics and transparency. These business leaders need to truly embrace high ethical standards. This current cynical world of "nothing matters unless you get caught" is eroding our markets and the faith of many in business leaders. This lack of faith has a direct impact on faith in stock markets and share prices.
So let's get back to basics in business, honesty and integrity and it might be surprising how fraud will decrease and faith increases as does the share price.
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada at http://www.issuescentral.com/. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Reuters. For IFRS Transition products, see http://www.ifrspartner.com/ from Issues Central.
An excerpt is here:
"Lord & Benoit, a Sarbanes-Oxley (SOX) research and consulting firm, just released The Tipping Point: Collision of Relaxed Regulation, Small Business and the Economy, a White Paper snapshot of the current economic, ethical and political environment for small business SOX compliance in the new Obama Administration. The Tipping Point provides a sobering post-mortem case study of a small, high technology public company that, according to a well-informed financial insider, "could have been saved if it had been complying with Section 404." The company, which received millions of dollars in investor capital during years of SOX deadline extensions, filed for bankruptcy and left a painful trail of financial destruction among investors, employees and suppliers."
The other interesting point the article makes is that fraud tends to increase in times of economic decline, for a lot of reasons. The new SEC Chair Susan Shapiro is a believer in the increased regulations of public companies and intends to push through SOX 404b this year. Makes sense since the original regulations were enacted in 2002. With all of the delays, many companies have not been taking the regulations seriously.
When I hear ( and I do frequently ) that these types of regulations are garbage and just busy work, this makes me think that the people uttering these remarks do not take the regulations and their implementation seriously. The regulations in fact try to have the issuers take responsibility for ethics as well as financial controls. So if ethics are "crap" then we are all in trouble.
In this prescriptive world of regulations, the business leaders need to take back the high ground and re-institute an ethical culture and stop the habit of complaining about regulations that are supposed to assist in high ethics and transparency. These business leaders need to truly embrace high ethical standards. This current cynical world of "nothing matters unless you get caught" is eroding our markets and the faith of many in business leaders. This lack of faith has a direct impact on faith in stock markets and share prices.
So let's get back to basics in business, honesty and integrity and it might be surprising how fraud will decrease and faith increases as does the share price.
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada at http://www.issuescentral.com/. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Reuters. For IFRS Transition products, see http://www.ifrspartner.com/ from Issues Central.
January 22, 2009
Thanks Christopher Cox for your Service and Vision on IFRS
It is always amazing when talented people take really tough political government positions, knowing that one day they may have to step down amid controversy. The Chairman of the SEC is one of those positions that may be the most thankless job in government (except possibly being President of the USA). Chairman William Donaldson (SEC Chair prior to Christopher Cox) was pushed out for being too aggressive in chasing Wall Street villains.
I had the pleasure of meeting Chairman Donaldson at an open SEC meeting in Washington during his tenure. He was warm, intelligent and passionate about the job. He did a great job. Too bad they pushed him out. Despite his initial ties to Wall Street he was relentless in his work in trying to route out corruption. I was heartened to see that he was on the advisory team to the Obama administration during the transition.
But despite being a Donaldson fan, I think that former Chairman Cox got a raw deal. Should they have followed up on the many tips the Commission allegedly received over the years about Madoff, Yes. But it is not like Cox spent the last 3 1/2 years doing nothing. They worked to root out fraud and had an impressive enforcement record in addition to working with smaller public companies to assist them in complying with SOX. Their guidance documents on the subject were excellent and well thought out.
The truth about fraud is that everyone who has ever audited and missed something knows that the hardest part about detecting fraud is if there is collusion. Clearly there were so many partners in Madoff's alleged crimes that he may have had to use several yachts to hold them all. Obviously, the old boy was pretty smart not to have been caught for so long.
There will always be criminals who are connected smart sociopaths in our midst. I do not care how much regulation you put into place, there will always be smart crooks who perpetrate fraud. It is not to say that it should be tolerated, it should not. But to think that regulation and regulators can catch every fraud is pure fantasy.
I say thanks to Christopher Cox for your record and taking action to move the US to IFRS because those are actions that no one will understand the importance until later. So good job and best of luck Mr. Cox. Some of us appreciate your hard work and vision for the future of American competitiveness.
If your company is moving to IFRS and needs a cost effective solution, and wants to do it in a sensible and cost effective way, contact http://www.ifrspartner.com/ for more information on IFRS Partner(tm) for companies beginning their conversion efforts. To find out more about events demonstrating these solutions, see http://www.ifrspartner.com/events.htm
I had the pleasure of meeting Chairman Donaldson at an open SEC meeting in Washington during his tenure. He was warm, intelligent and passionate about the job. He did a great job. Too bad they pushed him out. Despite his initial ties to Wall Street he was relentless in his work in trying to route out corruption. I was heartened to see that he was on the advisory team to the Obama administration during the transition.
But despite being a Donaldson fan, I think that former Chairman Cox got a raw deal. Should they have followed up on the many tips the Commission allegedly received over the years about Madoff, Yes. But it is not like Cox spent the last 3 1/2 years doing nothing. They worked to root out fraud and had an impressive enforcement record in addition to working with smaller public companies to assist them in complying with SOX. Their guidance documents on the subject were excellent and well thought out.
The truth about fraud is that everyone who has ever audited and missed something knows that the hardest part about detecting fraud is if there is collusion. Clearly there were so many partners in Madoff's alleged crimes that he may have had to use several yachts to hold them all. Obviously, the old boy was pretty smart not to have been caught for so long.
There will always be criminals who are connected smart sociopaths in our midst. I do not care how much regulation you put into place, there will always be smart crooks who perpetrate fraud. It is not to say that it should be tolerated, it should not. But to think that regulation and regulators can catch every fraud is pure fantasy.
I say thanks to Christopher Cox for your record and taking action to move the US to IFRS because those are actions that no one will understand the importance until later. So good job and best of luck Mr. Cox. Some of us appreciate your hard work and vision for the future of American competitiveness.
If your company is moving to IFRS and needs a cost effective solution, and wants to do it in a sensible and cost effective way, contact http://www.ifrspartner.com/ for more information on IFRS Partner(tm) for companies beginning their conversion efforts. To find out more about events demonstrating these solutions, see http://www.ifrspartner.com/events.htm
January 08, 2009
More Discussion About Moving the US to IFRS
It might seem like just one more monumental task to undertake during times of such great economic change, but think about this for a moment:
1. The US is projected to run at least a $1.2 trillion deficit for fiscal period 2009 by current estimates.
2. President-Elect Barack Obama is working congress to sell his economic stimulus plan to try to kick start the economy. This is projected to cost at least $1 trillion.
The US has certainly been the world financial leader since post World War II. But deficit spending on two wars, an economic stimulus in 2007, the 2008 economic stimulus TARP and more to come, the US is the world's largest debtor nation.
While one could make the argument that prosperity and consumer spending in the US has caused most boats to rise, the debacles on Wall Street and overspending by consumers has also caused a similar but negative reaction for the rest of the world.
The US finds itself in an awkward and unfamiliar position of a large sea change in power. Being a behemoth, causing a lot of financial wreckage around the world and a large debtor, puts the US in a position of much less power and flexibility. The US economy has been the envy of the world but that is changing. The latest cracks in ethics and large scale corruption have changed everything. It is not clear who will come out a winner from all this, but US reputation has certainly been tarnished. You cannot blame George Bush for this one, you can blame old fashioned greed for this one.
So things are changing for the US, and while it will always most likely be a world business powerhouse, it cannot afford to continue to be isolated in so many ways any more. One of these avenues is certainly accounting standards. If your emperor (Wall Street and business has been seen to have no clothes, many things begin to be examined. 112 countries have now moved or are moving to some form of the International Financial Reporting Standards (IFRS).
This is key to improving international business for all. The US must now understand that it needs to be a more equal partner to the rest of the world in many ways and accounting standards are a great way to start. The additional reason why this move is so critical is that US GAAP is the most complete accounting standard in the world and for many years the Financial Accounting Standards Board (FASB) has been working with the International Accounting Standards Board (IASB) to converge the two standards. So much accommodation to US GAAP has happened.
Is this a huge undertaking? Yes of course, but in the US' fragile economic state and with the new reality regarding its relationships to the world, it would be a good time for President Elect Obama to demonstrate some of that change he has been selling. Let's stop talking and start changing. The US may find itself being dictated to by other nations on many fronts with the expected loss of power that this latest crisis brings to the US.
Let's take the bold step in the US and converge with other nations on accounting standards as evidence that the US is a partner in the world and sees this and let's see some positive changes for all involved.
If your company is moving to IFRS and needs a cost effective solution, and wants to do it in a sensible and cost effective way, contact http://www.ifrspartner.com/ for more information on IFRS Partner® for companies beginning their conversion efforts. To find out more about events demonstrating these solutions, see http://www.ifrspartner.com/events.htm
1. The US is projected to run at least a $1.2 trillion deficit for fiscal period 2009 by current estimates.
2. President-Elect Barack Obama is working congress to sell his economic stimulus plan to try to kick start the economy. This is projected to cost at least $1 trillion.
The US has certainly been the world financial leader since post World War II. But deficit spending on two wars, an economic stimulus in 2007, the 2008 economic stimulus TARP and more to come, the US is the world's largest debtor nation.
While one could make the argument that prosperity and consumer spending in the US has caused most boats to rise, the debacles on Wall Street and overspending by consumers has also caused a similar but negative reaction for the rest of the world.
The US finds itself in an awkward and unfamiliar position of a large sea change in power. Being a behemoth, causing a lot of financial wreckage around the world and a large debtor, puts the US in a position of much less power and flexibility. The US economy has been the envy of the world but that is changing. The latest cracks in ethics and large scale corruption have changed everything. It is not clear who will come out a winner from all this, but US reputation has certainly been tarnished. You cannot blame George Bush for this one, you can blame old fashioned greed for this one.
So things are changing for the US, and while it will always most likely be a world business powerhouse, it cannot afford to continue to be isolated in so many ways any more. One of these avenues is certainly accounting standards. If your emperor (Wall Street and business has been seen to have no clothes, many things begin to be examined. 112 countries have now moved or are moving to some form of the International Financial Reporting Standards (IFRS).
This is key to improving international business for all. The US must now understand that it needs to be a more equal partner to the rest of the world in many ways and accounting standards are a great way to start. The additional reason why this move is so critical is that US GAAP is the most complete accounting standard in the world and for many years the Financial Accounting Standards Board (FASB) has been working with the International Accounting Standards Board (IASB) to converge the two standards. So much accommodation to US GAAP has happened.
Is this a huge undertaking? Yes of course, but in the US' fragile economic state and with the new reality regarding its relationships to the world, it would be a good time for President Elect Obama to demonstrate some of that change he has been selling. Let's stop talking and start changing. The US may find itself being dictated to by other nations on many fronts with the expected loss of power that this latest crisis brings to the US.
Let's take the bold step in the US and converge with other nations on accounting standards as evidence that the US is a partner in the world and sees this and let's see some positive changes for all involved.
If your company is moving to IFRS and needs a cost effective solution, and wants to do it in a sensible and cost effective way, contact http://www.ifrspartner.com/ for more information on IFRS Partner® for companies beginning their conversion efforts. To find out more about events demonstrating these solutions, see http://www.ifrspartner.com/events.htm
November 15, 2008
Roll Back Sarbanes-Oxley: Huh?
I am a big fan of Newt Gingrich, former US Speaker of the House. I watch him frequently on Fox News. He is extremely intelligent and well reasoned. That is on most things. But Newt and I part company on Sarbanes-Oxley. Mr. Gingrich is now lobbying to roll back Sarbanes-Oxley. I am not sure if this is a paid engagement, but one wonders.
Mr. Gingrich stated on Fox News November 15, 2008 that he believed that rolling back Sarbanes-Oxley would help businesses grow. First of all, that is such a general statement, let's analyze that:
1. Only public companies face Sarbanes-Oxley and only companies over $75Million in market capitalization have had to undergo 404 (b) external auditor atttestation. While these companies are approximately 90% of market cap, they represent about 5% of the total listings. So the larger volume of companies do not even face Sarbanes-Oxley because they are private and smaller companies have only done 404 (a) which is management's evaluation of internal controls.
2. I have personally worked with hundreds of companies in developing documentation for Sarbanes-Oxley and Canada's version NI 52-109 and it is clear that companies need to do this type of work. Most companies have flaws in their internal financial reporting processes that lead to fraud and errors. In many companies, this is not a theory, this is reality.
3. Just because there is a possibility that management can override controls and Sarbanes-Oxley cannot prevent this is not a reason to repeal it. Companies had not been managing internal controls and the fact that restatements went way up after Sarbanes-Oxley is an indication that there were problems.
4. Arguing against internal controls is the equivalent of arguing against honesty and integrity. In these times of an obvious lack of integrity on the part of many large companies, we really do not need to relax regulations that encourage strong internal controls.
Referencing a blog entry on this: The answer is, we need to keep Sarbanes-Oxley in place. When we can assure that all public companies will operate with total integrity, we can roll back Sarbanes-Oxley.
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada at http://www.issuescentral.com. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Reuters. For IFRS Transition products, see http://www.ifrspartner.com from Issues Central.
Mr. Gingrich stated on Fox News November 15, 2008 that he believed that rolling back Sarbanes-Oxley would help businesses grow. First of all, that is such a general statement, let's analyze that:
1. Only public companies face Sarbanes-Oxley and only companies over $75Million in market capitalization have had to undergo 404 (b) external auditor atttestation. While these companies are approximately 90% of market cap, they represent about 5% of the total listings. So the larger volume of companies do not even face Sarbanes-Oxley because they are private and smaller companies have only done 404 (a) which is management's evaluation of internal controls.
2. I have personally worked with hundreds of companies in developing documentation for Sarbanes-Oxley and Canada's version NI 52-109 and it is clear that companies need to do this type of work. Most companies have flaws in their internal financial reporting processes that lead to fraud and errors. In many companies, this is not a theory, this is reality.
3. Just because there is a possibility that management can override controls and Sarbanes-Oxley cannot prevent this is not a reason to repeal it. Companies had not been managing internal controls and the fact that restatements went way up after Sarbanes-Oxley is an indication that there were problems.
4. Arguing against internal controls is the equivalent of arguing against honesty and integrity. In these times of an obvious lack of integrity on the part of many large companies, we really do not need to relax regulations that encourage strong internal controls.
Referencing a blog entry on this: The answer is, we need to keep Sarbanes-Oxley in place. When we can assure that all public companies will operate with total integrity, we can roll back Sarbanes-Oxley.
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada at http://www.issuescentral.com. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Reuters. For IFRS Transition products, see http://www.ifrspartner.com from Issues Central.
