Recent Financial Accounting News

Note: My intention in my posts that are not lecture notes is to bring attention to news items that relate directly to the lectures or may be of general interest to the class. Enjoy!

Transition to IFRS

There have been several news items recently involving the transition from US GAAP to IFRS.

A July 28, 2008 interview with Conrad Hewitt, chief accountant at SEC.

In the interview, Hewitt says he "lifted" the transition roadmap which he inherited when he took office. By "lifted", I assume he means "trashed". He then says that the commission will redo the roadmap this summer (before Sept 21) and it will likely consist of a transition period, during which US companies can optionally use IFRS, followed by a full transition, at which point US companies must use IFRS. This phased-in approach is similar to the way SOX404 and XBRL were adopted as standards. Hewitt anticipates the transition to IFRS to be slower than the transition to XBRL.

Hewitt raises some practical concerns such as whether IFRS is being taught in universities and tested on the CPA exam. He also raises the issue of whether US companies are ready to train their staff and change their systems to use IFRS. He has spoken with the 6 largest accounting firms and they reported that they are retraining their staffs on IFRS.

The Rush to International Accounting

Accounting Convergence Goal Reset to 2011

PwC Releases IFRS Guides

PCAOB

Appeals Court Rules PCAOB is Constitutional

In last week's class, we learned about the role that PCAOB plays in setting auditing standards. It turns out that the Free Enterprise Fund and a small auditing firm filed suit claiming that the establishment of PCAOB violates the principle of separation of powers and is therefore unconstitutional. FEF claimed that since PCAOB officers are not appointed directly by the President, they therefore are "unaccountable and divorced from presidential control to a degree not previously countenanced in our constitutional structure."

The court ruled in favor of PCAOB. The WebCPA article characterizes the suit as a rogue act and not supported by major accounting firms and organizations, although the court's ruling was not unanimous.

You can download a PDF of the complete decision here.

See also Michael Cohn's commentary on how a Supreme Court appeal may look "Given the tenuous nature of some of the Supreme Court's close decisions in the last term and some of the justices' predilections, some of them may welcome the opportunity to place a stricter interpretation on the appointments clause and thereby strengthen the president's powers, depending on who the next president is, of course."