Edith Orenstein is one of those people I know I’d like, if I ever got to meet her in person. She’s smart, been around long enough to know a straight shooter from a BS’er, and knows how to subtly get a message across without hitting you over the head with it. And I love that Edith is letting her hair down a little, (lyrics from Willie Nelson, oh my!) even if she didn’t much like that I associated her name with a picture of Elizabeth Taylor in a slip in a previous post. Those of you that subscribe to my feed may have this seen this gem. Others will have to content themselves with the more demure, anonymous, half-torso version that was the replacement.
Maybe some folks will listen to Willie Nelson’s On The Road Again as background music for reading SEC’s proposed IFRS Roadmap. Although some of the lyrics would seem to speak to the ‘old days’ – e.g. “Insisting that the world keep turnin’ our way…” … other lyrics may inspire the move to one set of global accounting standards – a move predicted for a number of years now by the SEC, FASB, IASB and others:
“On the road again
Goin’ places that I’ve never been
Seein’ things that I may never see again,
And I can’t wait to get on the road again.”
2. Investors should be provided with information relevant to assessing the amount of wealth available to the reporting entity, claims on wealth, and how wealth has changed over time.
a. The balance sheet is the principle financial statement for reporting wealth (assets) and claims on wealth.
b. The claims on wealth are distinguished by non-owner claims (liabilities) and owner claims (owners’ equity).
c. The income statement reports changes in assets and liabilities for a given period resulting from transactions between the reporting entity and non-owners (or owners in a non-owner capacity). Such changes should clearly delineate the effects of operating and financing activities.
3. Wealth is the command over goods and services.
4. Providing information about wealth is costly. Financial reporting standards must weigh the aggregate costs an entity will incur in producing information against the benefits of being provided with information. This weighing of costs and benefits, has, among other things, the following implications:
a. Not all assets and liabilities of the reporting entity may be recognized on the balance sheet.
b. The most accurate approach to measurement of some recognized assets and liabilities may not be economically justifiable. Therefore, financial reporting standards may require or permit alternative measures that are less accurate, without sacrificing the objective of wealth measurement.
5. The needs of regulators, managers, or auditors are not directly germane to establishing financial reporting standards, except to the extent that their past and future actions cause the costs of producing information for investors to change.
…A move to international standards “will likely inflate the earnings of U.S. companies and mislead investors,” said Gregory Pai of Paradigm Asset Management in White Plains, N.Y. On the plus side, he noted, the convergence should eventually allow multinationals to save on their accounting bills. (Note from fm: This concern about “inflated earnings” is a non-issue. The level of the water in the lock will rise and all the boats will rise with it. All companies will adjust and once all are on standard, it’s all relative. Which is the idea…)
Big U.S. accounting firms support the push to a single world-wide rule book, and say the transition will take years. D.J. Gannon, a partner with Deloitte & Touche LLP in Washington, figures most U.S. companies aren’t ready yet to switch to international accounting, and probably need five to seven years to prepare. “Education and training is a big issue,” Mr. Gannon said.