Friday, April 25, 2008

SEC, Legislative Response to Market Turmoil (NYT's Norris); Rutgers Conference on Credit Crisis; European Parliament on IASB

The New York Times’ Floyd Norris, reporting on the Senate Banking Committee hearing on credit rating agencies at which SEC Chairman Christopher Cox and others testified earlier this week, notes that the role of credit rating agencies in the debacle is, as his article is entitled, “Where the Fingers Are Pointing.

In response to perceived conflicts of interest, Norris says, “Under the rules that the SEC is expected to propose this summer, rating agencies will be able to try a different business model, one that relies on payments from investors rather than issuers.”

Norrris adds that it appears credit rating agencies may be taking on more of a role of scapegoat than is their due. (He has previously written, as we cited previously in this month, that accounting rules were being overly scapegoated for their alleged role in the subprime meltdown.)

“That the rating process was badly flawed is now clear,” Norris wrote today. “But so was much else.” Among other causes of the credit crisis, he notes, were poor mortgage underwriting standards, and poor risk evaluation by institutional investors, relying too heavily on the credit rating agencies.

Rutgers Conference: “Overcoming The Credit Crisis: The Role of Continuous Assurance and Reporting”
In related news, a conference is being hosted May 9 at the Rutgers University Business School Management Education Center in Newark, NJ on: “Overcoming the Credit Crisis: The Role of Continuous Assurance and Reporting.” More formally, this is the “2008 International Journal of Disclosure and Governance (IJDG) Conference held in conjunction with the 2nd Continuous Reporting Conference at Rutgers University.” FEI President and CEO Michael P. Cangemi is among the speakers at the conference, with other experts in accounting, audit, business and technology.

Topics to be addressed at the conference include: (1) the causes and implications of the credit crisis, (2) the role that fair value accounting has played in the measurement and reporting of bank assets, (3) the need for continuous monitoring and assurance of financial transactions, especially in the light of the massive frauds at Societe Generale, (4) the ability of audit firms to appropriately measure and provide assurance on the risks posed by highly complex derivatives based trading instruments and strategies, (5) the need for accounting standards and internal controls to explicitly adopt a risk management perspective, and (6) the causes of the explosion in restatements of financial statements and the effect they have on the confidence of investors.
Financial Executives International (FEI) and its research affiliate, the Financial Executives Research Foundation (FERF) are among sponsors of the IJDG conference, along with the Institute of Management Accountants (IMA). Sponsors of the Continuous Reporting Conference are IMA, Grant Thornton LLP and the Rutgers Continuous Assurance and Reporting Laboratory. Register for the conference here.

European Parliament Adopts Resolution Calling for Changes to IASB, IASCF Governance, Transparency, and Greater EU Involvement
Yesterday (April 24) the European Parliament (EP) adopted this resolution which affirms that the EP “is firmly convinced that high-quality global accounting standards must be developed.”
The resolution also noted the EP “welcomes… the fact that the IASCF/IASB have sought … improve[ments] … through, inter alia, biannual meetings at which the IASCF reviews the IASB's work, impact assessments for new standards and the introduction of formalised feedback statements for comments received in public consultations.”

However, the EP believes certain changes to the IASB and its parent body, the IASCF’s governance, process and transparency should be made, including increasing the role of the EU.

As noted in our summary of key points from the resolution, among the EPs concerns are that the IASB has a quasi-legislative role without all the checks and balances applied to the legislature or quasi-government bodies like the IMF or World Bank; and concern is expressed about practical aspects vs. what EP perceives as increasingly theoretical nature of IASB standards, as well as significant concerns about IFRS for Small and Medium Sized Entities (SMEs).

Props to BNA’s Arthur Rogers for bringing the EP resolution to our attention, in his article, “EU Lawmakers Call for IASB Reform, Want Bigger Say for EU on Accounting Standards.” Rogers also includes related remarks of EU Internal Markets Commissioner Charlie McCreevy, who stated that the IASB’s proposed IFRS for SMEs standards, at 200 pages, were still “far too complex.”

"I am not going to endorse now or in the future something which no one understands," McCreevy said about the IASB’s IFRS for SMEs Exposure Draft, as quoted by BNA’s Rogers.
Regarding XBRL, McCreevy said he is engaged with discussions with European securities regulators on this subject. Rogers also noted: “McCreevy added that he had discussed XBRL--"a very exciting development"--with SEC Chairman Christopher Cox, during a recent visit to the United States. “

According to BNA’s Rogers, McCreevy said: “any steps towards requiring the use of XBRL in the EU should be subject to a thorough impact analysis, including the economic assessment of costs and benefits.” He added, “I support keeping this agenda point in our regulatory dialogue with the US authorities for the future. These standards will need to be internationally accepted, technologically independent and interoperable.”

If you’re following IFRS developments as they may impact U.S. filers, you won’t want to miss FEI’s June 5 conference in NYC, “The World Is Moving To IFRS – Are You?” For agenda, speakers, and registration info, go to: . For more international news, see our post yesterday, and if you received this blog post from ‘a friend’ and would like to receive our blog posts real-time, enter your email address here.

Print this post

1 comment:

My Blog said...

Norrris adds that it appears credit rating agencies may be taking on more of a role of scapegoat than is their due.