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SEC Chairman urges 'principles-based accounting standards'

22 Feb 2002

In a speech before the Federal Bar Council, SEC Chairman Harvey L.

Pitt called for a "move toward a principles-based set of accounting standards": [Click for Full Text]

Present-day accounting standards are cumbersome and offer far too detailed prescriptive requirements for companies and their accountants to follow. That approach, by necessity, encourages accountants to 'check the boxes' — that is, to read accounting principles narrowly, to ascertain whether there is technical compliance with applicable accounting principles.

But the first principle should always be the one Judge Henry Friendly articulated four decades ago... If literal compliance with GAAP creates a fraudulent or materially misleading impression in the minds of shareholders, the accountants could, and would, be held criminally liable.

That is why we are advocating fundamental and far-reaching changes in the Financial Accounting Standards Board. We seek to move toward a principles-based set of accounting standards.

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Additional notes from the 19-22 February IASB meeting

22 Feb 2002

We have posted notes of the discussion of First-Time Application of IFRS from the second day of the IASB Meeting on 19-22 February 2002. .

We have posted notes of the discussion of First-Time Application of IFRS from the second day of the IASB Meeting on 19-22 February 2002.

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EC urges US SEC to replace US GAAP with IAS

21 Feb 2002

In an interview with the Financial Times, Frits Bolkestein, European internal market commissioner, urged the US SEC to replace the 'cookery book' approach of US GAAP with the more 'substance over form' approach of IAS.

The Commission plans to require listed European Companies to Use IAS by 2005. Mr. Bolkestein expressed concern about what he felt is a rule-book approach of US GAAP: "You tick the boxes and out come the answers," he is quoted as saying. "Having rules is a good thing, but having rigid rules is not the best thing.... American investors are no more protected than European investors." At a minimum, he will ask the SEC to allow US-listed European companies to submit IAS financial statements without reconciliation to US GAAP. Click for the full Financial Times Story.

 

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FEI testimony criticises FASB, IASB support of JWG proposals

21 Feb 2002

In their Testimony (PDF 84k) before the ongoing US Congressional hearings on "Are Current Financial Accounting Standards Protecting Investors", Financial Executives International called mark-to-market accounting for financial instruments flawed and criticised both FASB and IASB for publishing and "strongly supporting" the Joint Working Group Proposal.

They voiced concerns regarding Enron's recognition in earnings of fair value increases for its energy trading derivatives.
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Additional notes from the 19-22 February IASB meeting

21 Feb 2002

We have posted notes from the second day of the IASB Meeting on 19-22 February 2002.

That session covered the Improvements Project, specifically issues relating to IAS 21, discussion of issues raised during the 18-19 February Meeting of SAC, and Performance Reporting.

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Notes from the 19-22 February IASB meeting

20 Feb 2002

We have posted notes from the first day of the IASB Meeting on 19-22 February 2002.

That session covered the Improvements Project, specifically issues relating to IAS 19, 21, 27, and 28.

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Notes from the 18-19 February SAC meeting

20 Feb 2002

We have posted Notes from the IASB meeting with the Standards Advisory Council on 18-19 February 2002. .

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FT urges IASB approach to accounting standards

19 Feb 2002

The Financial Times has been running a series of special reports, After Enron - Agenda for Reform 2002.

One report, Honest Numbers Require Robust Rules and Policing, suggests replacing US national GAAP with IAS:

The reform that is needed, therefore, leads away from US Generally Accepted Accounting Principles' very detailed prescriptions towards the approach of the new standards devised by the International Accounting Standards Board. The IASB approach, which emphasises substance over form, has been treated with mild suspicion in the US. But the Enron case, by revealing the limits of the prescriptive approach, has given impetus to the case for replacing national standards with IASB ones, or at least with rules sympathetic to the IASB framework.

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Fast track for Improvements Exposure Draft

19 Feb 2002

At its meeting with the Standards Advisory Council yesterday, the IASB indicated that it intends to vote on all the proposals for the Improvements Project at its February Board meeting.

The Board expects to publish an Exposure Draft including proposals for all 14 standards addressed in the project in April 2002, with a 90-day comment period. It intends to issue revised standards in December 2002, effective for financial periods beginning on or after 1 January 2003. Revisions to IAS 32 and IAS 39 are a separate project, not part of the Improvements Project.
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US Senate hearings on accounting continue 26 February

18 Feb 2002

Former SEC Chief Accountants Walter P.

Schuetze (1992-95), Michael H. Sutton (1995-98), and Lynn E. Turner (1998-2001) will testify, as will former FASB Chairman Dennis R. Beresford (1987-97). Click for Hearing Information.

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