SEC Chief Accountant: Lets Not Make This a Race to the Bottom, Mmmkay?

Thursday, September 17, 2009 , , , , , 0 Comments

Whoa whoa whoa, hold your horses there, killer.


SEC Chief Accountant Jim Kroeker told a group of CPAs that accounting standard-setters should avoid a “race to the bottom” when working on convergence.

Kroeker noted that some companies in Europe point to advantages that companies in the U.S. get when accounting for financial instruments, while some banks in the U.S. point to advantages that banks enjoy under international standards. “Many times that advantage is not any benefit to investors,” said Kroeker, speaking at a conference held by the New York State Society of CPAs’ Foundation for Accounting Education. “The advantage is that a financial institution may be able to portray themselves as being better off than they might actually be.”

He noted this could lead to a discussion of adopting some standards and not others. “That type of thinking, that is a race to the bottom,” said Kroeker. “It is an absolute concern that I have about what will be the result of a race to the bottom. My view is that if we engage in that type of behavior, if we engage in a race to the bottom, ultimately there will be no winner in that race. So it reinforces to me the importance of thinking about these issues from a global perspective.”

Kroeker said the SEC would be turning its attention this fall back to the proposed roadmap to International Financial Reporting Standards. In poring through the more than 200 comment letters that the SEC received, Kroeker noted that most of the comments agreed on the need for a single set of global high-quality accounting standards. “It’s like motherhood and apple pie,” he said. “How do you object to the idea that accounting standards in the U.S. be the same as globally?” The comments then diverge in matters such as how soon the U.S. should move to the IFRS, the cost–benefit concerns, and how to go about doing the transition. He noted that many comments were “downbeat” about early adoption of IFRS until a date certain for the transition had been set.

The Financial Accounting Standards Board and the International Accounting Standards Board have been working on converging their standards, but Kroeker noted that the two boards had faced challenges with recent efforts to converge the standards for financial instruments in response to the economic crisis. “You could look at their proposals initially and say there’s a deep divide, but if you look at it a different way, you might say it’s just a matter of degree,” he said. “The boards have different timeframes and different scopes, but they have agreed on a set of core principles.”

Finally. Fucking FINALLY. Mary Schapiro may not want to talk about IFRS but frankly I couldn't be happier to hear that the SEC is finally speaking up about adoption of International standards. Unfortunately, it sounds like Kroeker is pretty excited to get the ball rolling and ditch GAAP.

In many ways, this feels sort of like we're giving up some of our global supremacy. But I suppose we have it coming after we dropped the economic WMDs on the rest of the world.

I won't mourn GAAP's passing.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.