The Gutsball Blog

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Jul

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On Global Accounting Standards

On Global Accounting Standards

So, the Securities Exchange Commission (SEC) here in the U.S. has decided they may not be so crazy about the idea of one global accounting standard, according to the New York Times over the weekend.  Huh? Now you come out with this?  After how many years of international squabbling and causing every business person I know to wring their hands, if not freeze in place, at the thought of yet again more reporting requirements and government oversight.

I’m all for more transparency, and if the Enron / WorldCom scandals have taught us anything, surely the lesson is that the cheaters get caught eventually.  And I know there will be a hue and cry for more regulation in light of the latest saga of corporate misdeed and greed with respect to the Libor rates uproar.  But you can’t regulate everything, you’ve got to pick your spots and apply at appropriate levels, e.g. why do small businesses in the U.S. have reporting requirements similar to these of companies in the Fortune 500 under Sarbanes Oxley, better known at SOX?

And, would it be too much to ask for some consistency?  For several years the Financial Accounting Standards Board (FASB)and the International Accounting Standards Board (IASB) have been struggling to come to agreement on a global accounting set of principles and procedures with a special emphasis on off balance sheet treatment, that is to say, their goal has been to effectively eliminate it.  They released a draft for comment about 18 months ago with requirements so arcane and burdensome on finance companies and customers alike, it provoked a firestorm of criticism which led the parties to the joint effort to withdraw it, lest it cause further turmoil in worldwide financial markets…exactly what we didn’t need.

Ever since, the finance world has been engaged in communal breath holding as it awaits further developments in the form of a revised draft. (see above: handwringing, frozen in place).  But, no worries, the SEC seems to be saying never mind.  Apparently, the thinking is that even if there is a global standard, it will be interpreted and applied differently all over the world.  Really?  This did not come to mind before, thus avoiding all that frenzy?  Guess not.

Finally, a word for my business colleagues around the world…why all the fuss?  Leaders deal with ambiguity and make adjustments to all sorts of environmental changes.  In my career and in my industry, there have been numerous tax and regulatory initiatives, including the creation of the FASB itself!  Upon implementation, many have been considered the “Death Knell” of our business.  Didn’t happen, not even close, real leaders find a way.