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By Ronald Fink
The Securities and Exchange Commission shouldn't offer blanket acceptance of the use of international accounting standards by U.S. companies, a prominent accounting expert wrote on Thursday.
The SEC is scheduled to complete its review by Dec. 21 of a so-called "road map" for converging international accounting standards with U.S. Generally Accepted Accounting Principles. The map is expected to establish a date certain when all U.S. companies can report their results in International Financial Accounting Standards instead of U.S. GAAP. An initial version of the road map called for convergence of the two regimes by 2014, subject to SEC review.
But Jack Ciesielski, an analyst who runs the advisory firm R.G. Associates in Baltimore, wrote on his website, the AAO Weblog, that the International Accounting Standards Board has proven to be so susceptible to political influence that its standard setting process cannot be trusted by investors, and that the SEC road-map should therefore offer "plenty of maneuvering room for U-turns" as a result.
Ciesielski said the IASB "disgraced itself" when it acceded to pressure from European politicians influenced by the banking lobby to ease its fair value accounting rules last year so that banks needn't report losses. He noted that the board changed its rules without giving investors a chance to review them.
"That was the beginning of the end of the IASB's credibility as an independent standard-setter," the analyst added. "Its political plight has only gotten worse since then."
The IASB's U.S. counterpart, the Financial Accounting Standards Board, has more recently also succumbed to political pressure to ease its fair value accounting rules, with bank regulators lobbying on the industry's behalf. But Ciesielski insisted in an email to CFOZone on Thursday that the FASB has held its ground more effectively than the IASB.
"In terms of who's done worse for investors, I'd say that the FASB at least stuck with its due process, even though it was pretty ugly, and also tried to present information to help investors to at least compensate for [its] actions."
It's not clear at this juncture to what degree the SEC might be rethinking its acceptance of IFRS.
In September, SEC Chairman Mary Schapiro co-signed a letter from international securities regulators who serve on the IASB's monitoring board criticizing political influence in accounting standards setting.
And while Schapiro later said that the regulator would complete its review by Dec. 21 after a nine-month delay, SEC Chief Accountant James Kroeker said at a conference in New York last month that the commission remained committed to the general principle of convergence.
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