The Silent Treatment

Regulators think that companies are too shy when it comes to airing their views on fundamental accounting issues.

The Write Stuff

Clearly, CFOs at nonfinancial firms harbor strong opinions when it comes to convergence. Why, then, do so few express them publicly? Even if comments like Adante’s and Macmillan’s are diametrically opposed, it makes for better rulemaking if regulators and standard-setters at least hear them.

When Macmillan joined CME, it was his first experience with U.S. GAAP. It was also his first experience with another sort of comment letter, the kind that the SEC sends to companies to question certain aspects of their accounting. Although these letters are “sometimes a pain in the neck,” the CFO reckons that it is a “healthy” process. “It takes you a step further in terms of expecting that everything you do will have to be justified,” he says. If letters provide a useful way for the SEC to keep companies honest, shouldn’t those same firms jump at the chance to return the favor?

Jason Karaian is senior editor for financial services at the Economist Intelligence Unit.

A Divergence on Convergence

While most CFOs have said little publicly about U.S. adoption of international financial reporting standards, some have spoken up. Below are excerpts from comment letters to the SEC.

“The question only remains as to when IFRS will be adopted, not if it will be adopted…. the Commission should consider broadening the population of companies that may elect to adopt IFRS for their consolidated U.S. public filings prior to the proposed 2014 requirement, perhaps even eliminating the size requirement from the Roadmap…. there are clear benefits to both the
[c]ompany and to investors in allowing us to adopt IFRS as soon as practically possible.”
— Eduardo Cordeiro, CFO, Cabot Corp.

“…it is imperative for the U.S. to play a leadership role in a rapidly globalizing world and we feel that if the U.S. remains outside the IFRS framework, then we will somewhat compromise our ability to participate in, and influence, important matters related to the overall operation of global capital markets.”
— Martyn Webster, VP of Finance, XenoPort Inc.

“…the large majority of U.S. public companies, like Darden, serve primarily domestic customer bases and are adequately capitalized without tapping overseas capital markets. Rather than mandating IFRS for all companies, we believe it would be more appropriate to allow large multinational organizations to adopt IFRS on a voluntary basis.”
— C. Bradford Richmond, CFO, Darden Restaurants

“In our opinion, there has been no groundswell of public opinion promoting a conversion to IFRS. In fact, we have never heard an investor in our company, any stock analyst covering Hertz, or any lender with which we do business suggest to us that they would prefer we report our results in IFRS.”
— Elyse Douglas, CFO, The Hertz Corp.

(Comment letters on the so-called road map for IFRS are available on the SEC’s Website, http://www.sec.gov/comments/s7-27-08/s72708.shtml.)

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