• The FEI CFRI Conference…And More

    By • Nov 18th, 2009 • Category: Latest, Pure Content, Regulators, Laws, Standards, Regulations, Where I've Been

    Charlotte: Let’s never come here again because it will never be as much fun.

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    I’ve just wrapped up two days of conference attendance here in New York City – The FEI Current Issues in Financial Reporting Conference and the Directorship Boardroom Leaders Forum.

    How were these conferences the same?

    • Attendees were corporate executives (CFOs at CFRI and General Counsels/Board members at Directorship) and the professional services providers (auditors, lawyers, consultants) who serve them.
    • Almost everyone wore formal business attire. There were more women at CFRI, mostly men in very dark suits at Directorship.
    • Rhetoric is pro-business, anti-regulation, cost consciousness and NYC/DC versus middle-America sensibilities.
    • Almost everyone at these two conferences thinks the recession is pretty much over and the recovery has started …except for the companies attending CFRI that are still cutting/losing billions like GM and one Director from Ohio by way of the UK at the Directorship event.
    • Both groups are acutely aware of the issue of executive compensation and have a hard time understanding why the media keeps focusing on it.
    • Both conferences seemed to have no problem attracting plenty of paid attendees (800+ and ~200 respectively) and lots of quality vendor sponsors.
    How were these conferences different:
    • CFRI: “…must attend event for preparers of corporate financial statements…latest accounting and reporting developments from SEC, FASB and IASB.”
    • Directorship Boardroom Leaders Forum (BLF):  “…the leading boardroom executives and governance professionals.”
    • CFRI was very technical, tactical, hands on practical.
    • Directorship BLF was all about law, lawyers and the people who hire them. Notable was a keynote from the Chief Justice of the Delaware Supreme Court, Myron Steele and an admission by Chairman, CEO & Editorial Director Jeffrey M. Cunningham that he had been a Director at Countrywide and thinks Angelo Mozilo has been unjustly maligned…
    The Directorship BLF started with a dinner on Monday night which I was unable to attend but that featured what I heard was a great speech by “pay czar” Kenneth Feinberg. The BLF conference itself didn’t kickoff until later Tuesday morning.  In the meantime, on Monday I attended several sessions at the FEI CFRI conference.
    Monday’s keynote address at the FEI CFRI conference was given by Ron Insana of CNBC.  I’ve probably seen him speak on TV before but can’t specifically recall.  I watch CNBC for a specific segment or interview only. Otherwise, the talking octagons make my brain hurt.
    Mr. Insana gave a nice historical overview of the US economy since 1920 with the Japanese crisis, the Mexican peso crisis, and the Russian ruble collapse thrown in to sharply punctuate the timeline. The point of his story was that if you’ve been working for a while, and he and I have, you know that this may be the worst crisis but it’s not the only one we’ve ever faced and probably won’t be the last. It was interesting to me that Mr. Insana is a working hedge fund manager, although this exchange on Twitter should tell you how that’s working out for him. But he is a SME who has been in financial journalism for a long, long time, so I listened to his opinions with a different ear than I do with the typical talking head.
    Even if I don’t agree.
    Next up was the FASB/IASB update moderated by Gary Kabureck, Corporate Vice President and Chief Accounting Officer, Xerox Corp with panelists Patrick Finnegan, Board Member, International Accounting Standards Board, Russell R. Golden, Technical Director, Financial Accounting Standards Board, Robert H. Herz, Chairman, Financial Accounting Standards Board.
    Bob Herz, also follicle-ly challenged, made a Ron Insana joke to kick it off. Patrick Finnegan was an interesting (and handsome) addition to the dais, substituting for the always hilarious Sir David Tweedie. Edith Orenstein always does a spectacular job getting all the notes and translating them faithfully and meaningfully for us.  So I will defer to her.
    After the formal panel, the press was invited to a private briefing with Finnegan and Herz. Edith also documented my question to Herz which was elaborated on handsomely by Finnegan.

    Herz was asked by Francine McKenna of Re: The Auditors what he thought about the major audit firms’ push for companies to move to IFRS, and how to respond to critics who may say, ‘If the firms are for it [IFRS, etc.] then we probably should be against it.”

    Herz replied:

    I think the firms are genuine in their belief [of the value of convergence] but I think they kind of rushed it… and everyone said, ‘here’s another [Sarbanes-Oxley] 404.’ I told some of the [audit firm] leaders that ultimately, [the goal is] high quality convergence, not just [convergence] for the sake of convergence.”

    My question actually referred to a discussion from a recent dinner with retired professor Tom Selling, Kevin La Croix, and Jim Peterson in Chicago where many tales were told over steaks and cocktails. Tom Selling opposes IFRS convergence. One of his arguments is that the Big 4 auditors are for it. Anything they’re too strongly for, according to Tom, may be suspect, may be wrong, and is probably on their agenda primarily because it will bring them more revenue.
    Because IFRS adoption is not in the interest of investors, the CPA firm push for IFRS is contrary to the AICPA code of ethics, “Ask yourself whether the AICPA’s one-sided promotion of IFRS constitutes an attempt to serve or to fleece the public.”
    Bob Herz chuckled at my cheeky question at CFRI.
    My follow-up to Herz and Finnegan asked about the previous bundling by the Big 4 of support for  IFRS adoption with Congressional approval of liability caps. You don’t hear that anymore, but it was recurring theme especially right after the Treasury Committee issued their report on the future of the accounting profession.  (Thank God we have that report or we wouldn’t be where we are today…)

    Financial Times, November 2007 Deloitte urges new guidelines

    James Quigley, Deloitte’s chief executive, has called for regulators to draw up new guidelines for the auditing profession to fit in with an emerging “principles-based” approach so firms have a basis for defending themselves if they are sued for making mistakes.

    The head of the accounting firm told the FT that the profession needed a framework that would provide a “safe harbour” as the US moves towards a more principles-based approach to auditing and away from “bright line rules”. Thenew approach would require a firm to use its professional judgement instead of strictly adhering to rules.

    Herz agreed. You don’t hear that in public anymore as everyone has become preoccupied with the crisis. Maybe they realized it was bad form right now to be pushing such an obvious agenda. Maybe they’re pushing it in the background.  Patrick Finnegan of the IASB suggested that we look at another study, in addition to Dr. Selling’s and Grant Thornton’s, with regard to IFRS support.
    According to Finnegan, the CFA Institute Centre for Financial Market Integrity’s Member Poll on the IFRS Roadmap shows that investors want a global standard. Finnegan said we have to stop looking at cost as a prohibition to what investors need and want. The financial statements are there to serve investors. If we only looked at the cost (or what harried CFO’s do or don’t want to spend time on) as the determining factor we would never do anything to improve accounting standards. They, investors/shareholders, pay either way. The IASB thinks shareholders would rather pay for better, more consistent, financial information.
    More FEI CFRI and Directorship BLF comment and review coming later today and tomorrow.
    For a replay of some of the key Directorship BLF presentations, go here for the webcasts. (Registration required.)

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    1. […] It was a busy couple of days in New York last week.  I hadn’t planned on splitting my time between two conferences.  But when one of my Twitter contacts said he would be at the Directorship Boardroom Leaders Forum and I looked at their agenda, I knew I had to do both. […]

    2. […] lawyers and outside accounting experts the opportunity to charge a lot for finding loopholes.  The global audit firms publicly support IFRS adoption in the US because it creates more work for them and may provide a back door opening for liability caps.  The […]