bob jensen: beware the accounting borg

bob jensen, a truly legendary accounting professor, has been blogging about accounting since before they were called blogs.

lately, he’s been taking aim at the sec’s and fasb’s support of ifrs. he pulls no punches, and even includes in his latest commentary this hilarious photoshopped picture of star trek’s dr. mr. spock decked out in an ifrs-emblazoned green eyeshade.

jensen says:

the roaring sec-fasb (read that cox-herz) enterprise for replacing domestic accounting standards such as u.s. and canadian gaap is analogous to letting the federation  govern the world. both the u.n. and the international accounting standards board have lofty intentions, but multinational politics in the federation is a nightmare to behold.

sadly we have a chair of the sec who is willing to abuse his powers in favor of large international accounting firms without giving other stakeholders a voice in the debate! cox had to force this thing through quickly before he’s ridden out of town after the november 2008 election. sadly, chris cox will leave office with both u.s. capital markets and the u.s. financial accounting/auditing systems in disarray. it’s not so much that he’s a bad person. it’s just that he was too trusting of the oligopolies when allowing them free hand in policing themselves. that did not work all well as we’re now writing into the histories of disasters.

as a departing (hopefully soon) director of the sec, the legacy of chris cox will not be commendable in spite of a record number of successful recent sec court cases against financial fraud. john mccain announced during his campaign that, if elected president of the u.s., one of his first acts would be to fire chris cox. in spite of some great leadership against specific targets of fraud, chris cox failed to see the dangers in allowing oligopolies to control two industries. in the case of wall street, commissioner cox decided not to exercise the sec’s power and responsibility of oversight of investment banks. and wall street investment bankers took advantage of lax sec oversight to a point of self-destruction.

in the case of the accounting industry, chris cox decided to allow the oligopoly of the largest international accounting firms to dictate, for all u.s. accounting firms and u.s. industry, abandonment of our rich heritage of u.s. accounting principles in favor of an incomplete set (compared to u.s. gaap standards) of international accounting standards (ifrs). although this might be a commendable goal in a couple of decades after the international accounting standards board has the resources and infrastructure and standards in place to take on the giant u.s. economy, the large-firm oligopoly seemingly moved too quickly to make this transition. possibly the large accounting firms rushed us into ifrs this year because they had chris cox under their thumbs.

ifrs has it’s share of an outspoken minority in the profession. but the “roadmap” that the sec laid out shortly before the financial meltdown now looks like it could be derailed by, as they in accounting, “subsequent events.” my geuss is that u.s. accounting standards, already the gold-standard in capital markets, will eventually prevail in ifrs, especially since the iasb destroyed its credibility by caving to euro bankers on fair value.

more from jensen here.

posted on november 2, 2008