You might reflexively think about a possible combination of US accounting standards and international accounting standards, but no - the urge to merge internationally is what's going on at Ernst & Young .

The firm announced the merging of "87 country practices in Western and Eastern Europe, the Middle East, India and Africa into a new EMEIA Area." That's not all: the 700 partners in the Far East practices supported a similar move across 15 countries and territories.

" The EMEIA Area will operate as a single unit, led by a single executive team and, where allowed by laws and regulations, be underscored by formal combinations of practices. The new Area will be a US$11.2 billion organization with more than 60,000 people. The 3,300 partners of EMEIA will vote on the integration by the end of May. The new EMEIA Area will be effective from 1 July 2008.

The integration of the Far East Area creates a US$1.2 billion organization, with more than 20,000 people. The new structure will also be effective from 1 July 2008.

That doesn't make the firm suddenly bigger or grow more quickly. And it doesn't really change too much for the investor. What's interesting though, is that it gives a couple glimpses inside the auditing world that investors rarely get. First, the sheer size of a Big Four organization is something investors rarely contemplate. The EMEIA area alone will be an $11.2 billion organization, meaning it's hugely important to the firm as a whole: last year, E&Y's global revenues were $21.1 billion. That puts them in the same league as Electronic Data Systems or Constellation Energy Group; ahead of JC Penney or Tyco. Yet investors rarely consider the size and reach of these firms that are acting as their agents in the auditing of financial statements.

The other glimpse: note that these practices were under the E&Y tent, but as different country practices. It's not like all of the firms within the firm are necessarily as uniform as investors might believe. Going forward, there should now be a high degree of consistency and uniformity in the way these practices operate within E&Y. That's something that should matter when say, a Peoria-based audit client has a significant business unit in the Middle East that's audited bythe EMEIA arm of E&Y. Yet investors never wonder much about how the audit gets done until a failure shows up. Nor is there much information available about how the audit gets done.   

Former Fannie Mae CEO Franklin Raines, along with former CFO Tim Howard and former controller Leanne Spencer, settled with its regulator, the Office of Federal Housing Enterprise Oversight,  last Friday.

Recall that Fannie Mae famously abused its accounting for derivative transactions and fee recognition, and has taken years to bring its financials statements back up to the present. According to the OFHEO release, Raines will pay $24.7 million, comprised of:

"The proceeds from the sale of Fannie Mae stock, valued at $1.8 million to be donated to programs and initiatives to assist homeowners threatened with the loss of their homes or related initiatives to assist homeownership, as approved by OFHEO.

Payment of $2 million to the United States Government.

Surrender and relinquishment of claims related to stock options with a value of $15.6 million when they were issued.

Other benefits lost in association with the above estimated at $5.3 million."

It's easy to picture Mr. Raines standing in a corner, with his head hung in shame. In reality, he's probably doing a victory dance: originally, OFHEO had hoped to win $115 million from him. And the Washington Post paints a very different picture of the composition of that $24.7 million:

"The agreement includes stock options worth $15.6 million at the time they were issued; those options are currently under water. They entitled Raines to buy shares at prices of $77.10 and higher. Fannie Mae's shares are currently trading at about $29, so the options Raines is surrendering would not produce any benefit to him unless the share price rose dramatically, according to sources familiar with the settlement who spoke on the condition of anonymity because they did not want to be seen as criticizing the regulator.

OFHEO said Raines's settlement also includes the payment of $2 million to the federal government. That sum would be covered by a Fannie Mae insurance policy, the sources said.

The settlement also includes proceeds from the sale of stock worth $1.8 million, to be donated to programs aimed at assisting financially strapped homeowners. Those are shares Raines had been fighting in court to obtain from Fannie Mae."

Doesn't seem to carry quite the same sting, does it? Not only is the settlement vastly reduced from the original amount of damages sought, the party that Franklin injured - Fannie Mae and its shareholders - wind up picking up the tab for his malfeasance. The terms were similar for Howard.

Is this a great country or what? It's getting to be a weird country, that's for sure.

Last week's Barron's contained a good story  by Andrew Bary on gains being recognized by investment banks on their marked-down debt. I've been a bit surprised by the number of people who've asked about this in the following week: it's not new news. I wrote dedicated reports about it last March, again in June, and once more in November. And it's not as scary as it sounds - Bary's piece was sharp and insightful, and shows that there's a skeptical audience out there when it comes to including such gains in the earnings stream that investors should capitalize. And he quoted some other knowledgable folks who believe this kind of earnings element should not be capitalized by investors.