Tweedie: Well, [with regard to accounting for] lessors, a lot of that will be tied up with revenue recognition [which is also being fast-tracked].
Take leasing for example: You’ve got a $600 billion U.S. industry worldwide. At the moment, very little in the way of leases are on balance sheet, either under U.S. GAAP or under IFRS. The scope changes were simple in a sense: One of the big difficulties with leasing is if you lease something for seven years, and you have an option to do another seven, how do you value the option? Well, let’s take a guess. But even if we don’t get to the stage of valuing the option, if we make them book the existing liability, that is going to put billions of dollars on balance sheet. That is a huge difference — much, much better that we’ve got at the present.
So while we are taking about scope change, what we are really doing is pulling it down to the core of the standard and saying is it worth doing it? The answer with leasing is an emphatic “yes.” And the same with pensions: Get rid of all the smoothing devices, which has been done in the United States and UK. But then we’re going on further, we’ll actually tackle the gains [being reported from] the pension funds. Warren Buffett has actually written to some of these companies, saying he’s an expert investor, but how are these guys getting the returns they are claiming? These are things we are going to do. While it’s scope change, we’re still making big improvements.
The New York Times article also quoted Senator Carl Levin, a Democrat, as saying that the United States can’t delegate or cede control to regulators overseas. Do you have any concerns that the move to IFRS and IASB’s goal of becoming the world’s accounting standard-setter could become a political issue in the upcoming election, or be derailed by a Democratic administration?
Zalm: Well, as a former politician [Zalm is former Deputy Prime Minister and Minister of Finance of the Netherlands], I surely hope not. I think if there is any subject where politicians should not politicize, it is accounting.