On Friday, the Financial Accounting Foundation appointed Marc Siegel, leader of the Accounting Research and Analysis Group at RiskMetrics Group, to take over the board post currently held by George Batavick, who will retire from the FASB.

I've known Marc from our membership on the Investors Technical Advisory Committee since it started in January 2007. I think he'll be a fine addition to the slimmed-down board - and he's going to be joining it a pivotal time in the Board's history, as it faces the fallout from the Wall Street bailout bill - including a hostile pushback of fair value accounting. Not to mention the IFRS convergence efforts, which seem to have been forgotten in the last couple of weeks by most observers of the financial reporting scene. (With good reason.)

I'm sure Marc will do a fine job and will bring a keen understanding of the investor's point of view to the table. Good luck to him, and best wishes to George in his retirement.

From the Angry Bear blog (and soon to be in every American's email inbox):

Your Urgent Help Needed

Dear American:

I need to ask you to support an urgent secret business relationship with a
transfer of funds of great magnitude.
I am Ministry of the Treasury of the Republic of America. My country has had
crisis that has caused the need for large transfer of funds of 800 billion
dollars US. If you would assist me in this transfer, it would be most
profitable to you.

I am working with Mr. Phil Gram, lobbyist for UBS, who will be my
replacement as Ministry of the Treasury in January. As a Senator, you may
know him as the leader of the American banking deregulation movement in the
1990s. This transactin is 100% safe.

This is a matter of great urgency. We need a blank check. We need the funds
as quickly as possible. We cannot directly transfer these funds in the names
of our close friends because we are constantly under surveillance. My family
lawyer advised me that I should look for a reliable and trustworthy person
who will act as a next of kin so the funds can be transferred.

Please reply with all of your bank account, IRA and college fund account
numbers and those of your children and grandchildren to
wallstreetbailout@treasury.gov so that we may transfer your commission for
this transaction. After I receive that information, I will respond with
detailed information about safeguards that will be used to protect the
funds.

Yours Faithfully Minister of Treasury Paulson

Much political hay will be made this week over the proposed bailout bill. Could anyone have scripted a more bizarre scenario only a month and a half away from the national election?

While the candidates duke it, figuring which way a position will garner them more votes from the other or get thos undecided voters to decide in their favor, there will be another fight going on: the battle to dump fair value accounting.There are rumors of legislative action that calls for a moratorium on Statement 157.

As if Statement 157 had anything to do with the crisis. Understand one thing if nothing else: if a bank or investment firm makes serial horrendously stupid investment decisions, like continually lending money to people having no wherewithal to repay, hiding that fact from investors will not make you whole. It will not resolve a liquidity crisis. Fair value reporting tells investors what assets are worth, and gives investors a heads-up on managements' stewardship of assets.

The problem with fair value accounting now is that it's telling investors that there wasn't much stewardship at all. Go back a few years, when these firms were reporting record earnings: did anyone question fair value reporting then? Of course not. It's a different story when fair value reporting shows culpability.

The current "blame the accounting" mode is like berating the UPS delivery man who brought you a pair of tan Gucci loafers instead of black ones you ordered. What did UPS have to do with faulty goods? Nothing; Gucci screwed up. What does Statement 157 have to do with crummy asset values? Nothing. Managers screwed up.

It's doubtful that many critics of Statement 157 actually ever read it. If they did, they might actually see that this didn't sweep in any broad new applications of fair value reporting. The last standard that required many new applications of fair value accounting was Statement 133 on derivatives - back in 2000. Firms have always been required to write down impaired assets. There's never been a bye to just leave junk on the balance sheet, even before Statement 157.

What's different now? Two things. Statement 157 requires far more disclosure about the nature of financial instruments gracing the balance sheet. Firms always had to take a stab at the value of a security before; now when they do, investors have an idea of how that figure was developed - so they can believe it or not. Hence, the disclosures about Level 1, 2, and 3 hierarchies of fair value. Sunshine on how numbers were developed: that's the biggest improvement in reporting to investors brought by Statement 157.

The second difference: the kinds of financial crud now subject to fair value reporting has never been this plentiful, thanks to the imagination of lenders and investment bankers who concocted CDOs, CDOs-squared, CLOs and all the other alphabet-named implosion devices. Of course they're hard to value; that just might have something to do with why they don't trade. If these things are now nearly worthless, why is it better to delude investors into believing they're worth something more? Just so the firms that made poor decisions can recapitalize themselves from deceived investors?

If there's anything that should have been learned from this fiasco, it's that markets need information to function well. It seems as if the firms that have tanked didn't even have good information INSIDE their own firms about risks, collateral and cash. Taking information away from investors not only puts them at a disadvantage in making investment decisions - it give the advantage to the already-inept. So how can you expect efficient capital allocation at a market level?

Last week, PCAOB member Charles Niemeier addressed a New York State Society of CPAs conference. He spoke his mind about the one-sidedness of the movement towards IFRS adoption in these United States. As reported by CFO.com, Charles raised the valid point: moving to IFRS can "put in jeopardy the thing that gives the U.S. a competitive advantage ... All research shows that the U.S. is unique in its regulation. No [country] is as effective . . . . We have the lowest cost of capital in the world. Do we really want to give that up?"

Apparently, the SEC doesn't buy into the research conclusions showing that the United States has the lowest capital cost on the globe. Although at the moment, with two major financial institutions going into either outright liquidation (Lehman) or de facto liquidation (Bear), and a government takeover of Fannie Mae and Freddie Mac, you'd have to wonder if our cost of capital is still the lowest in the world. If it isn't, it would be a mighty stretch to say our cost of capital rose because we're not on the IFRS train yet. Let's just say there are a few other possible reasons why our capital cost might be strained.

Niemeier goes on to explore myths about IFRS convergence, such as the fact that it's "principles-based," not rules-based.
"IFRS is not more principles-based, it's just younger," said Niemeier. He pointed out that the US once followed a more "principles-based" system - but a 1969 court decision, U.S. v. Simon, spurred the development of many rules because it found that simply sticking to generally accepted accounting principles is not a foolproof defense when charged violating antifraud securities laws. Auditors sought guidance from standard setters, and the house of GAAP grew into a skyscraper.

Another myth Niemeier took on: the use of IFRS will enhance comparability. While it may be that US financial statements might be more similar to those in other countries, there's an inherent contradiction in the "principles-based" dream. If "principles-based" standards allow companies and auditors to exercise more judgment, how can company-to-company financials ever be more consistent? Worse yet: if companies start to exercise "nostalgic accounting" by employing judgment in the application of IFRS that makes their results resemble their prior national accounting system results - and this may be happening already - how can expansion of IFRS make things more comparable?

His speech hasn't been posted on the PCAOB website yet, but when it is, I'll be sure to provide a link. I think he's on to a lot of the concerns that need to be addressed in accounting standards convergence. Investors are not served well if convergence is merely "convergence by decree" - something that happened when the SEC removed the reconciliation of IFRS to GAAP earlier this year. As Charles puts it, we need to "return to a policy of convergence to achieve something noble, not convergence for uniformity's sake. We should strive for comparability, not just say it."

WebCPA.com reports a survey of 535 accounting professors conducted by the American Accounting Association and KPMG showed that only 22 percent of them intend to incorporate IFRS lessons into their plans for the 2008-9 academic year.

Bad enough - but 62% of them "admitted they have not taken any significant steps toward doing so."

Don't they read the papers? You're entitled to wonder. One legitimate excuse offered by the profs: it's hard to fit anything more into the curricula. There's more justification for a mandatory five-year program.

The survey also showed that they didn't expect textbooks to be available on the subject until the 2010-11 academic year. They're probably right - but that doesn't mean they can afford to turn out students who will be facing new accounting challenges the minute they walk onto the job. There is a real opportunity here for schools to differentiate themselves from the pack. The ones that can develop a rugged program that at least teaches students IFRS rudiments - and how to continue learning afterwards - will be able to attract the best students and engender the best relations with the Big Four when recruiting time comes for their graduates.

Deloitte intends to lay off 900, or 2%, of its U.S. employees, according to this article by WebCPA. No official release by the firm could be found on their website, but the article cites an e-mailed statement from the firm. A clip:

"The cost-containment program is taking place across all support functions and client service units. Part of the plan is to align our headcount according to current and projected revenues."

"According to current and projected revenues?" Well, that says something about where Deloitte expects audit and consulting fees to go this year.

A little surprising, really - not so much that the firm expects pressure on its fees, but that the cuts are taking place across all client service units. You could expect that client firms might be doing more restructuring and requesting more advice in tough times.

It's not likely to last. The coming IFRS transition will provide many public accountants full employment for their lifetimes. It wouldn't be surprising to see Deloitte hire replacements for the 900 US members they're laying off - and then some - in the next couple years.

The big news last Friday: the Public Company Accounting Oversight Board doesn't look like it's in imminent danger of extinction. Remember that lawsuit charging that its creation was unconstitutional, filed back in early 2006? It was filed by a Las Vegas accounting firm with an axe to grind: they were being investgated by the PCAOB while being investigated themsel