GLOBAL ACCOUNTING STANDARDS, MYTHS AND THE NEWS CYCLE
President Obama frequently cites the “twenty-four hour news cycle” which pounces on everything and often becomes a source of misinformation, rumors and distortions rather than news. This has become such a regular part of his speeches that the pundits are now commenting on his commentary on the news cycle.
Those claiming that the SEC is following the lead of the administration – such as some of the critics of the Goldman enforcement action – should review SEC Chairman Mary Schapiro’s latest speech. In her Remarks at CFA Institute 2010 Annual Conference delivered on May 18, 2010, the Chairman states that a number of myths have evolved regarding the SEC’s commitment to international accounting standards. These come not from the twenty-four hour news cycle of Mr. Obama’s speeches but the lack of news coverage Ms. Schapiro referred to as a “news void . . .”
The Chairman began her remarks by reviewing a number of recent Commission initiatives. Once is the “Dear CFO letters.” The first of what is going to become a periodically used tool of Corporation Finance was sent out in March 2010 to large financial institutions. The letter requested information about repurchase agreements, securities lending transactions and other arrangements involving the transfer of financial assets. The purpose is to gather information to assess the need for accounting and disclosure changes.
To fill the news void about the SEC’s commitment to the adoption of global accounting standards, Ms. Schapiro then addressed four myths which have evolved:
Myth 1: The SEC’s does not have a strong commitment to the project. Citing comments from the Commission’s Statement in Support of Convergence and Global Accounting Standards from February, the Chairman noted that this myth is simply wrong.
Myth 2: The U.S. is dragging its feet on the project. Wrong again says the Chairman. While the FASB and the IASB have worked diligently, key issues remain. These include accounting for financial assets – the type which were at the center of the financial crisis – as well as principles involving revenue recognition, consolidation and leases. In this regard, the Chairman stressed the importance of the process established by the FASB and IASB which is designed to ensure high-quality improvements to accounting standards.
Myth 3: The U.S. is fixated on process. This myth is also inaccurate. The Commission will not, however, accept shortcuts that could undermine the larger goals of ensuring high quality global standards. It is critical during this process that the IASB and the FASB be shielded from undue political or commercial pressures. While the IASB process of using a Monitoring Board to safeguard against outside pressures slows the process, it helps ensure that the standards are high quality.
Myth 4: The U.S. is protecting its parochial interests. Wrong again. The Commission is committed to ensuring that investors around the globe are protected and that all who participate in the U.S. markets “come under the SEC’s umbrella of protection.”
Dispelling all myths, and filling in the news coverage void, the Chairman concluded by reiterating the Commissions commitment to global accounting standards.