BY PAUL B. W. MILLER AND PAUL R. BAHNSON
IFRS, FASB, income taxes,
the AICPA, and auditing
news is that
Every so often, we’re overwhelmed by the variety of topics available for our column. We’ve decided to touch
briefly on 19 current issues, doing a “
Lightning Round,” instead of covering only one
political corruption and organized crime?
Adopting IFRS surely cannot eliminate these
5. Hoogervorst’s vision. The IASB chair
also spoke in Mexico about the board’s future plans. Playing to those who cling to the
status quo, he cast this flaccid vision: “Let’s
fix what needs fixing, and no more,” and offered a multi-year period of “relative stability.” These words show he wants to build a
global empire, instead of dealing with real
issues. Why else would he want to do nothing
substantive when his board’s agenda should
be full of significant projects?
one but two hot-under-the-collar campaigns
to inundate the FAF with meaningless carbon
copy letters. This behavior is neither persuasive nor admirable.
Paul B. W. Miller is a professor at the
University of Colorado at Colorado Springs
and Paul R. Bahnson is a professor at Boise
State University. The authors’ views are
not necessarily those of their institutions.
Reach them at firstname.lastname@example.org.
1. European patience. In February, Thomson
Reuters reported that Michel Barnier, a European commissioner and lifetime French
bureaucrat, chided the U.S. Chamber of
Commerce by saying, “European patience
has its limits, and we are not far from reaching that limit. We hope the United States will
apply [IFRS].” We reply to his patronizing and
condescending comment by saying, “Who
cares?” Before lecturing the U.S., M. Barnier
should learn about the many structural, political and philosophical impediments that
make IFRS and the International Accounting
Standards Board unsuitable.
2. Schapiro’s resolve. The same article reports that Securities and Exchange Commission Chair Mary Schapiro is feeling “no
pressure” to abandon the best interests of
American investors and capital markets by
participating in the IFRS love fest. Unlike so
many others, she gets it and hooray for her.
3. Hoogervorst’s delusion. IASB Chair Hans
Hoogervorst has announced to various audiences that he expects the U.S. to adopt IFRS
within a few months. Besides framing the issue incorrectly (the question is whether the
U.S. will endorse the IASB), he needs to realize that nothing’s going to happen beyond
the Financial Accounting Standards Board
incorporating a few select ideas from IFRS.
He should also accept the possibility that the
IASB will incorporate some of FASB’s ideas
4. Hoogervorst’s pipedream. In January,
Hoogervorst made this absurd claim in Russia about the results of their adopting IFRS:
“International companies will now be able
to raise capital in Russia while international
investors will be entirely familiar with ... Russian financial statements.” Is he oblivious to
the fact that the country is rife with such significant risk factors as economic instability,
6. Emerging strength. Now that FASB’s quest
to converge core standards has lost steam, its
members can begin to pursue their own vision and resolve issues they consider important. This effect, combined with the board’s
bolstered independence, has produced a
newfound strength that was recently demonstrated in their unpopular but resolute
decision to not redo FIN 48 on income taxes.
We’re expecting them to get started on pervasive issues, like pensions, cash flow statements, and inventory in order to produce the
great progress that is so obviously needed.
7. Private-company GAAP. We continue to
be bemused by the private-company GAAP
fray where people so adamantly demand
what they don’t realize they’re asking for.
Why are so many clamoring for a separate
board that just won’t work like they think it
will? Specifically, legitimate private-company GAAP will require reporting fair asset
and liability values to support decisions
about private companies’ creditworthiness
and aggregate market value.
8. Private-company GAAP politics. If they
weren’t so fervent, the actions of PC-GAAP
proponents would be laughable. First, they
stacked a so-called “Blue Ribbon Panel” with
people who already had their minds made
up. Next, this biased group received input
only from CPAs and managers who echoed
their pre-existing views. Then, when the Financial Accounting Foundation said that it’s
not interested, the AICPA Elite unleashed not
9. Tax reform. We’re seeing one politician after another claim to know what’s needed to
fix the tax system, including campaign promises to eliminate “loopholes” while creating
“incentives.” That idea sounds good until you
grasp the difference between those terms. To
a politician, tax law creates an incentive if it
produces benefit for you or your constituents; it produces a loophole if the benefit goes
to someone else.
10. Tax accounting reform. Alas, policy discussions on tax reform would be more productive if GAAP provided useful information
about who pays how much tax and when.
SFAS 109 basically affirmed the old bad idea
that a dollar of postponed taxes is still a dollar of current expense, with the result that
most corporations pay far less than the tax expense on their income statements. Because
informed debates require solid numbers
about how much they’re actually paying, it’s
time GAAP provided them.
11. Massive gains looming? While politicians are agreeing that corporate rates should
be reduced, no one seems to anticipate
what that move would do to GAAP income.
Under SFAS 109, deferred tax liabilities for
postponed payments are measured by multiplying accumulated taxable temporary differences by the rate expected to apply when
the differences reverse. If the tax rate is cut,
all those liabilities will instantly shrink and
the resulting gain will be offset against the
current year’s tax expense. Imagine the political outcry when corporations report huge
upfront increases in after-tax EPS as soon as
12. Dumb LIFO Trick No. 1. The administration’s plan proposes eliminating LIFO,
thus taxing the difference between LIFO
and FIFO results. If that happened, reported
operating margins would show a big (even
humongous) one-time boost when decades-old costs flow out of inventory accounts into