What’s the Diagnosis – Accounting Fatigue Syndrome (AFS)?

At a recent conference in Orlando, financial executives discussed one of the top reasons for employee fatigue – a continuous stream of regulatory and accounting standard-setting guidance that has been issued in recent years and the promise of more to come over the foreseeable future.

Questions:

1. Although the article provides little detail, what accounting standard-setters and regulators do you think CFO’s are referring to?
2. What areas will be affected by the six major projects currently under way, which are expected to be revealed next June?
3. Explain why Jay Hanson of McGladrey & Pullen says that “more principles-based rules will require seasoned professionals, not recent graduates.”
4. What particular area of accounting is one that will demand “an army of people”?

Source: Johnson, Sarah. (2010). “A Growing Contagion: Accounting Fatigue Syndrome,” CFO.com, March 9. (Retrievable online at http://www.cfo.com/blogs/index.cfm/l_detail/14482207?f=blog_mostrecentpost)

The Effects of Converting to IFRS

The Effects of Converting to IFRS

The primary question raised in this article is:  “What effects would switching to IFRS have for companies, if forced to switch by the SEC?” Based on a panel of four executives from four major companies, most agreed that there will be almost no material effects in areas that investors care about. 

Questions:

1.  Based on the opinion of Jack Klinger, director of accounting research at Alcoa, what would be the greatest impact of IFRS for his company?

2.  What did Aaron Anderson, director of IFRS policy at IBM see as the benefit of converting to IFRS?

3.  Based on comments by HSBC’s chief accountant, John McGinnis, what was a benefit to the bank of reporting U.S. results in IFRS?

 Source:

Leone, M. (2010). Unfazed by IFRS. CFO.com, Today in Finance, April 30. (Retrievable online at http://www.cfo.com/article.cfm/14495043/c_14494842?f=TodayInFinance_Inside)

Politics in Accounting, Really?

A member of the International Accounting Standards Board, James Leisenring, told attendees at the Standard & Poor’s Accounting Hot Topics conference in New York on December 10, 2009, about possible abuses and accounting arbitrage that may result from IASB’s recently issued standard for recognizing and measuring financial instruments. In his remarks, he acknowledged that political pressures had forced the board to publish the standard. In his remarks, Leisenring presented serious reservations about company adoptions of the new standard, IFRS 9, which is the first of a three-part effort to replace the IAS 39 standard on financial instruments. (For an EU perspective, refer to the article by Peter Williams.)

QUESTIONS:

1. Who are the political powers that Leisenring contends were pressuring the IASB? Do you think this happens with FASB processes? Explain.

2. Look at the article by Carver (in particular, the sixth & seventh paragraphs). Leisenring is critical of the “look-through” method of accounting for products like collateralized debt obligations. What are collateralized debt obligations and tranches?

3. Where do collateralized debt obligations appear on the financial statements under U.S. GAAP?

Sources:

Carver, Laurie (2010). “Abuse of Revised IFRS Standards “Inevitable” – IASB’s Leisenring,” Risk.net. (Retrievable online at http://www.risk.net/life-and-pensions/news/1567708/abuse-revised-ifrs-standards-inevitable-iasb-s-leisenring)

Cohn, M. (2009). “IASB’s Leisenring: Pay No Attention to IFRS 9,” WebCPA (Retrievable online at http://www.webcpa.com/news/IASB-Leisenring-Pay-No-Attention-IFRS-9-52702-1.html)

Williams, Peter. (2009). “Accounting: IFRS 9 and What It Means For Year-End Reporting,” Computeractive (Retrievable online at http://www.computeractive.co.uk/financial-director/comment/2255297/shock-value)

Japan’s Big Accounting Move

During the week of December 7, 2009, Japan’s Financial Services Agency (FSA) announced that it is moving to the formal adoption of International Accounting Standard (IAS) reporting by 2015. Up until now, the FSA has allowed Japanese companies to file consolidated statements using U.S. GAAP, but in 2015 this may end. The agency will make a final determination about whether to make IAS reporting mandatory in 2012.

QUESTIONS:

1. Based on this article, what are the major differences between U.S. or Japanese GAAP and IAS?
2. Approximately what percentage of current firms on the Tokyo Stock Exchange may be affected by this decision for the future?
3. What are the four major reasons cited by Japanese companies that are considering early adoption of IAS?

SOURCE:
Whitten, D. (2009). Shifting the Goalposts: Japan to Adopt New Accounting Rules. iStockAnalyst (Retrievable online at http://www.istockanalyst.com).

What Will the Future Bring for Lease Accounting?

CEOs and CFOs are cautiously eyeing the limitations that convergence of FASB and IFRS standards may bring to lease accounting. Predictions are that a new global lease standard, anticipated in 2011, will require many traditionally classified operating leases into the capital lease status.

QUESTIONS:

1. What are the current FASB criteria for classifying leases as either operating or capital leases?
2. What is the general concept that the FASB and IASB are considering as the way to distinguish between capital and operating leases?
3. Explain how this new reclassification would cause “balance sheet blues” and companies that lease to “appear more highly leveraged?”

SOURCES:

Johnson, S. (2009). “Balance-Sheet Blues,” CFO (Retrievable online at http://www.cfo.com/article.cfm/14457794/c_2984368/?f=archives)

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