Financial Accounting Standards Research Initiative

Big thanks to Mark Evans and everyone who participated in yesterday’s Round Table. We look forward to seeing you all next week. Read more > >

About a year ago (March 12, 2009) the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Entities held a hearing titled “Mark-to-Market Accounting: Practices and Implications.”  The Committee members directed several hours of fairly hostile questioning to FASB Chairman Bob Herz and SEC Chief Accountant Jim Kroeker.  If you have not seen [...] Read more > >

The SEC essentially punted today on the decision to adopt IFRS in the U.S.  Acknowledging that the SEC is in the same position they were in November 2008 (when the proposed roadmap was originally issued), Mary Schapiro said the SEC hopes to be in a position by 2011 to make this decision. One of the [...] Read more > >

If you weren’t there for yesterday’s roundtable with Aaron Beam & Weston Smith, I strongly urge you to view the archived copy of it.  I was fascinated by their rendition of the Health South fraud (both CFO’s there).  How many journal entries do you think it took each quarter to manage the books.  You’ll be [...] Read more > >

A recent FrontLine episode, called “The Warning”, was about Brooksley Born, who was director of the Commodity Futures Trading Commission for some years during the Clinton administration.  The show made a strong case that she tried very hard to warn the financial world up through 1998 that OTC derivatives were a very big risk.  Alan [...] Read more > >

In the regular issue of the FASB Action Alert (February 11) that comes into my inbox, there was a link to a document called “FASB Update, Financial Statement User Edition.”  I haven’t seen this particular form of the FASB Update before; perhaps I’m just not aware of this series.  Here’s the link.  It provides a [...] Read more > >

If HRC's actual results fell short of expectations, Scrushy would tell HRC's management to "fix it" by recording false earnings on HRC's accounting records to make up the shortfall. -- SEC vs. HealthSouth Corporation[HRC] You look back and think, 'What was I thinking? Why didn't I just do the right thing?' But when you're caught up in [...] Read more > >

I don’t know what kind of study it might be, but seems like big versus small firms and internal control testing might rise again as an issue.  Did you hear about the recent fraud at the headphone company.  It was in CFO.com.  Let me give you a brief cut from the article. Fraud Case Casts Doubt [...] Read more > >

Due to some very busy schedules, there won’t be any roundtable discussion today.  But look for some announcements soon for upcoming events. Read more > >

Dan Dhaliwal, Vic Naiker, and Farshid Navissi recently posted a paper up on SSRN titled “The Association between Accruals Quality and the Characteristics of Accounting Experts and Mix of Expertise on Audit Committees.” Their research looks at post-SOX data and various characteristics of audit committees that have an impact on accrual quality. “Our results indicate a [...] Read more > >

Sanjeev Bhorjraj, Robert Libby, and Holly Yang have a paper on SSRN titled “Analyzing Guidance at the Firm Level: The Association between Guidance Frequency, Guidance Properties, and Market Reactions.” The paper is the first to examine the relationship between the frequency and type of guidance issued by firms and the accuracy of that guidance and [...] Read more > >

I always enjoy listening to the State of the Union address. If you missed it, I highly recommend at least reading a summary like the one found here. One of the things that President Obama proposed was that congress “provide a tax incentive for all large businesses and all small businesses to invest in new plants [...] Read more > >

Wow, i just learned the following.  Did not know this … From:  Comment from Michael A. Moran and Abby Joseph Cohen, Goldman Sachs: Global Markets Institute – Accounting Policy Update: SEC takes action on climate change disclosures On January 27, 2010 the SEC approved, by a 3-2 vote, new interpretative guidance on existing disclosure requirements related [...] Read more > >

I was excited this past week to read that the IASB recently published a second exposure draft on a portion of IAS 37 Provisions, Contingent Liabilities, and Contingent Assets. I know, excitement might be too strong of a word, but I was looking forward to seeing whether the IASB’s decision on how to measure onerous [...] Read more > >

I was thinking about Jim’s comments about research helping standard setters.  A long time ago there was some debate on the ability of archival researchers to do ex ante research … some back and forth on that point.  I’m not an archival person so I don’t think about whether they can do ex ante or not, and [...] Read more > >

Prof. David Albrecht has an extended post on The Summa arguing for the politicization of accounting standards: It is the responsibility of a country’s government to adjudicate between competing economic interests in the selection of accounting standards. This is what government does.  For example, governments are good at levying and collecting taxes, which has been going [...] Read more > >

Tom Selling has a few interesting posts on The Accounting Onion.  First, he takes a careful look at troublesome Revenue Recognition practices at Apollo Group, the parent company of University of Phoenix.  He also provides a broader list of red flags that analysts should add to their repertoire.  These are useful posts for academics, with [...] Read more > >

I just read an article on CFO.com. It talks about an alleged 31 million dollar embezzlement in a company that reports only 38 million in sales each year. According to the article, The auditor’s response has been to highlight the fact that Koss is one of the companies that are not yet subject to Sarbox’s [...] Read more > >

From a Credit Suisse First Boston report From a Credit Suisse First Boston report By David Zion, Amit Varshney, and Christopher Cornett Spinning Losses into Gold November 12, 2009 Last Friday President Obama signed into law the Worker, Homeownership and Business Assistance Act of 2009, which among other things contains an amendment that would temporarily extend the carryback period [...] Read more > >

In my technical accounting research class and in recent consulting work, I often have been reminded of the need for reasoned judgment in our profession. With the general move toward more objectives-based standards (using the SEC parlance), the need for professional judgment only will increase.  Recognizing the need to teach and understand what professional judgment [...] Read more > >

Somehow I ended up on the mailing list of Risk.Net, which hails itself as “The world’s leading monthly magazine dedicated to the risk management and derivatives industries.”  In this week’s top story, headlined “Abuse of revised IFRS standards “inevitable” – IASB’s Leisenring“, Jim is quoted as expressing concern about using management intent to determine how [...] Read more > >

I’ve often heard of academics heading off to do an academic fellowship. Several, upon return, have commented on how the fellowship helped them connect with urgent issues, charge their batteries, and get ideas and resources for research. Fellowship opportunities are diverse in their functions and duration. Firms, standard setters, enforcement agencies, etc. are often interested in [...] Read more > >

I hope everyone is refreshed and ready for the new year — and a challenging one it will be for standard setters, with the convergence deadlines rapidly approaching.  To get you started, here are some thoughts on Principles vs. Rules, from Paul Miller and Paul Bahnson, academics who have a regular column (The Spirit of [...] Read more > >

It isn’t too surprising that the FASRI blog has been quiet, and it surely will be for another week or so.  There will be some interesting changes and improvements to the site when you return from vacation (I’ll keep you in suspense for now). But if you need your fix of accounting information and commentary, it [...] Read more > >

In one of our discussion groups at the FASB’s Financial Reporting Issues Conference, we had a lengthy discussion about whether a lease represented the promise to transfer a bundle of rights (which could be satisfied at contract signing) or the promise to allow someone to use an asset for a fixed period of time (which [...] Read more > >

My colleague John McInnis at Texas alerted me to this article. Very good stuff.   I wonder how much will come back on the balance sheet with the new rules that go into effect in Q1 of 2010.  I have read that Citibank expects (don’t have figure handy) a relatively small portion to come back on [...] Read more > >

Having recently attended the FASB/IASB issues conference on revenue recognition, leasing (lessor), and insurance, I was struck by how terminology gets in the way.  For example, figuring out what “unit of account” might mean seems to be something many debates were centered around … yet there’s not a definition of this notion.  So much of [...] Read more > >

Sorry for the light blogging, but I have been preparing for the upcoming Financial Reporting Issues Conference.  As always, the cases are a real challenge.  Here are a few questions to ponder: If I write an option, can it possibly be an asset?  Before you instinctively answer “of course not” (after all, you have given someone [...] Read more > >

When the AAA-FASC committee wrote a letter opposing the Perlmutter Amendment, I asked “Are there any academics who would support such a proposal?” It turns out the answer is yes:  David Albrecht of Concordia College, and author of the blog The Summa (as in the book by Brother Luca Pacioli, father of double entry bookkeeping).  Here [...] Read more > >

The Perlmutter amendment that would allow a regulator to set GAAP is getting a lot of press.  But Congress members have more work in mind for the FASB.  Representative Scott Garrett has proposed an amendment that requires the FASB to study the economic effects of its recent securitization rules (FAS 166 and 167).  Apparently, Garrett [...] Read more > >