Hank Paulson has suggested its an option in his $700bn rescue package for the US economy, while an alternative plan from a minority group of Republicans has simply said it needs to go.
Here in the UK George Osborne at the Tory conference got infected overnight and yesterday said it should be suspended for three months.
Politicians have well and truly got the accounting bit between the teeth and for the time being at least don't want to let go.
And this is peculiar because frankly every regulator going has given its approval to mark to market or fair value.
It strikes me that all these plans would only add to the confusion for investors. This week JP Morgan analysts wrote that blaming mark to market/fair value is like blaming a doctor for telling you you're ill. The think tank, The Centre for Audit Quality, pleaded with Congress to reject suspension plans. Federal Reserve chief Ben Bernanke has supported it, the IMF has approved it, standard setters stand by it, I imagine if you asked the Dalai Lama right now he would give it the nod.
But politicians, well, politicians see things differently. A contact inside the IASB, the protector of fair value for most of the financially savvy world, admitted that yes, the regulators were onside but, 'when politicians get involved, it's difficult to predict the outcome.'
I'll say it is. While in the US the calls for suspension are now vociferous, there is little or nothing on paper at the moment about what would replace it. Zip, as they might say.
Over here The Tory three month plan seems, well, bizarre. Like the crisis would last just another quarter? Which crisis is Osborne dealing with? And the alternative? Detail is frankly scant, but it seems to be to allow banks to value assets at the price they expect to get over the long term. Like we have faith at the moment in letting them work that out.
I'm with BT chairman and former KPMG chief Sir Mike Rake on all of this. Hold your nerve, no knee jerk reaction to regulation and rules. Accounting is only the means of delivering bad news, not the cause of it. Running from mark to market or fair value will only make the financial sector look as if it likes living in denial. Now is not the time to duck the facts.
There can be few practitioners who have found themselves in a similar position. I know insolvency people who have dealt with gangsters, international pop stars, Nazi apologists, football stars and top politicians, but none that have seen the key individual, and his family disappear, and the assets destroyed quite so tragically.
Rod Butcher and Adrian Woods, who founded and run the practice in Birmingham, will have to draw on all their experience to get through the next few weeks. They will, of course, take the police through their work in detail, but nothing they have done so far in their working lives will have prepared them for being involved in what is clearly an appalling tragedy. As hard as being a liquidator, administrator, or trustee in bankruptcy is, no one expects to deal with circumstances like these.
While their experience cannot be compared to that of the family of the Forsters, I can only imagine that these events must create some of the hardest professional circumstances imaginable.
]]>So far auditors have had to issue going concern statements in their audit reports. These are agreed with directors, but it falls to the auditors all the same.
Trouble is there's been a traditional reluctance to issue them because of fears that the statement itself could precipitate a collapse. ie. the going concern statement could be viewed as a serious threat to a company's status as...a going concern. Oh dear.
Of course, placing the burden with directors raises the same point, though it does lift the pressure off auditors (something they will be mightily thankful for). Directors will still feel that if they make the statement they will see it do the damage when there might have been a feasible rescue strategy in the offing, if only everyone was to stay calm and let the them get on with it.
Trouble is the boiler plate nature of the current options - 1. confidence, 2. doubts about the business being a going concern, and 3. the business is not viable. Going concern is clearly the only conservative option if the auditor has worries. It strikes me that the going concern statement requires different shades of urgency itself, perhaps three grades. That might be an effective way of softening the blow of making a statement without sending the company over the edge.
]]>The US regulator has set a roadmap for introducing voluntary use of the standards which have been in force in Europe since 2005 and are being adopted by many other countries at quite an exceptional pace.
The US has been among the most the reluctant to get on board until the current SEC chief Christopher Cox came along and gave them his backing.
Cox believes enormous benefits will accrue to US business if they use the standards, not least that they compete much better for capital.
However, not everyone over there sees it the same way. Senator Jack Reed argued that investors could be put at risk by allowing standards to be regulated by a less aggressive regulator.
Let's unravel this. First, the IASB does not enforce IFRS. It writes the standards, but national regulators and legislators must adopt them and then enforce them. If the US decides to use them, the US will have to enforce them. Simple as that. The IASB is merely there to determine the best rules.
Secondly, this smacks of quite a persistent train of thought that somehow people outside the US cannot set decent rules and that somehow control must be handed over.
A little mistaken of course because Enron and WorldCom did not happen over here.
The introduction of IFRS is now open for consultation over the next 60 days. All manner of objections and views will be submitted. But expect this undercurrent: 'We can accept the logic of IFRS, but we must control the standard setter.'
Given its current independent status, and the very fact that independence is partly responsible for its success so far, that would be a pretty far reaching demand and one we should be rightly nervous about, especially if it gains any traction among US politicians and regulators. Yet another bit of pressure coming to bear on the IASB? We'll see.
]]>Currently the MD that turned around things at Wembley Stadium, Horne is a braver man than I for taking on a top job at the FA. The history of football's ruling body is littered with the battered and wounded careers of others who have tried to exert some authority in what is clearly one of the most high profile and challenging environments for an executive to work in.
Here's a potted history. Adam Crozier, a marketing guru, went after intense criticism of the out-of-control spending on Wembley Stadium. Mark Palios had to leave after becoming embroiled in a sex scadal with secretary Fair Alam, who had also had an affair with the then England manager Sven Goran Erikson. Brian Barwick, current CEO, is on notice after falling foul of chairman Lord Triesman and going through the controversy that followed his appointment of Steve McClaren as England manager.
From this we can discern some important advice for anyone taking on a senior role at the FA, especially as Horne is being touted as being among the most influential people now ensconced at Soho Square.
Firstly, consider carefully whether the people you are appointing are qualified for the job. Make sure you stay on budget. Lastly, keep you trousers on.
Actually, there is something else you have to do for a successful time at the FA. Win something. That might be a tournament, or it could be success at winning the bid for the 2018 World Cup.
My guess is that Horne is more than able to avoid the pitfalls of predecessors. The bigger question will be whether he is able to lead the team to a win. The new job is arguably more high profile than anything he has done so far, there will be more press attention than ever before. What will be crucial is keeping a single minded focus on the job.
Given the bear pit that is UK football administration, he will need to draw on all his experience and skill to keep things working. You've got to wish him luck.
]]>Despite running the second largest firm in the country he must be the highest paid accountant in the country in practice. I venture to suggest, and I do not have proof at my finger tips, that he must be the highest paid practice accountant ever.
It's astonishing. More impressive is that the average pay for more than 650 partners is £970,000. It's arguable that Deloitte might just be employing an historic number of millionaire partners.
Given that figure, and the fact that Deloitte turns over £2.01bn in the UK (beating this year's self imposed £2bn target), I bet there aren't too many within the firm that begrudge him that pay packet.
Still, it's interesting to note that if he were in a public company, there might well be taunts of fat cat pay. As it is Connolly only has to satisfy the other owners of the business. His partners. Wonder if they ever consider complaining about his remuneration?
Of course, there's another way to see this. Connolly needs a pay day commensurate with his belief that his firm has overhauled its rival in terms of reputation. His wage slip has certainly overtaken everyone else's.
Produced by the US Financial Executives Institute and Baruch College's Zicklin School of Business, the survey of a little more than 200 CFOs says that 70% of those polled believe an Obama regime would be damaging, while 71% backed John McCain as best serving their business interests.
I can only assume this really stems from Obama's redistributive talk on tax. The policy is this: overall burden falls, but some rates rise to push it onto better off voters.
CFOs tending to be better off than most, you can can understand the poll results.
Still, nice to see a certain section of the US not being seduced by Obamamania, and remaining a little level headed. Someone's got to.
]]>Click here to read the full report
]]>Moorgate Place
, who found themselves choking on their morning pastries .
Bush’s next move was to describe IAS39 as ‘legitimised market abuse’.
Then he turned on the International Accounting Standards Board comparing it to a ‘tractor factory’. ‘It’s a command and control model from the 1970s.’
And just as everyone thought they could eat in peace he said: ‘Change the board – they’re yesterday’s men.’
Never has the IASB and one of its standard had such a public malling (actually, that may not be true. IASB chairman Sir David Tweedie has been brutalised in the
US
on more than one occasion and appears to thrive on it) by someone in such a public place as
Moorgate Place
’s Great Hall.
In fact Bush’s presentation was not just mud slinging, he went at some substantive issues pretty vigorously too, which, I can say, at least impressed the people sitting immediately around me.
But it is worth bearing in mind IAS39 will change. The IASB is consulting and yesterday hosted a webcast, involving 600 people, to discuss the issue. The top brass at the IASB is well aware that something is wrong and I am told they look forward to seeing Tim Bush’s submission to the consultation.
]]>At the moment all thoughts on the future of Wenham Major amount only to speculation, though some of it will be better informed than others.
What is clear though is that the firm and its bank, HBOS, have been talking to outside advisers about what to do, including corporate restructuring specialists at Vantis. It's probable that conversations have been held with other potential advisers too.
What these discussions will produce is unclear. Corporate restructuring people have an armoury of things they can do. But much of it will have to do with the scale of the 'irregularities', as yet not published, and the level of damage perceived to have been wrought on the reputation of the firm, if any.
And that will be a crucial factor in the next stages of the Wenham Major recovery.
During the Enron collapse damage to the reputation of Andersen was thought to be so severe, the firm could not continue as it was and partners in member firms around the world quickly started merger/takeover deals. Here in the UK, you'll remember, much of what was Andersen became part of Deloitte, seen as something of a coup among the other Big 4 firms at the time.
However, KPMG in the US survived its own brush with notoriety when the authorities pursued the firm over various tax schemes. Key individuals acted quickly, damage was limited, and the crisis subdued. Few outside the profession, as important as its view is, remember that particular debacle.
These are poor comparisons in the sense that these firms were of an entirely different magnitude to Wenham Major but KPMG, at least, illustrates that reputational damage can be headed off and the crisis contained.
Wenham Major, it is understood, is keen to point out that the 'accounting practice is profitable, growing and meeting its operational and financial targets'. The message has also come out that a 'business as usual' approach is being taken with staff and clients. And if we know anything about what to do when accountancy firms hit troubled times, it is that clients need a lot of attention. In fact, it could be argued that it is clients and their approach to difficulties that can represent the difference between rescue and an increasingly uncertain future.
But Wenham Major is interesting for another aspect of its problem. From the outside it could be argued that there is a uniquely 'personal' flavour to the difficult.
When Wenham Major Global Capital Partners first made its irregularities statement it said that Ammar Azam, joint owner of the firm, had uncovered the problem. And, of course, Azam jointly owns the business with John Joyce.
With threats of legal action kicking around that's a business relationship that appears to have reached an abrupt end. Of course, it must be said, that Joyce has passed no comment in public so we are yet to hear his side of the story. And his account may prove crucial to what happens next at the firm.
]]>I had the good fortune of spending a whole morning in the company of Reed just before her departure and she was concise, though very frank about what she'd found at Standard Life. She was happy to admit that some things, especially in the finance department, needed sorting out.
She was professional, incisive and perfectly amiable during the entire time we both worked on judging the Accountancy Age awards.
It's a piy others could not have seen the qualities that were so evident that day. They might have saved themselves a coniderable sum of money.
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