Peeling away financial reporting issues one layer at a time

With Niemeier as Chief Accountant, the Yoke of IFRS Will be Lifted

I recently found this quote from H. G. Wells, the English novelist and historian, in the introduction to the "Mike Gravel edition" of the Pentagon Papers:

"The true strength of rules and empires lies not in armies or emotion, but in the belief of men that they are inflexibly open and truthful and legal. As soon as a government departs from that standard, it ceases to be anything more than 'the gang in possession,' and its days are numbered."* [italics supplied]

I wasn't reading about the Pentagon Papers in search of a financial reporting parable; but alas, such is my wont in this tide of times. Or, perhaps it was because Bloomberg News set my heart aflutter when it reported that an unnamed source disclosed that Mary Schapiro is considering making Charles Niemeier the SEC's Chief Accountant. Follow-on coverage is available from the CPA Blog.

Niemeier was a charter member of the PCAOB, and before that he was Director of the SEC's Division of Enforcement. He is a CPA who has practiced both securities law and accounting.  In addition to his obvious qualifications– well-educated, intelligent and experienced — there are three other things I like about Niemeier. First, he rehabilitated "maverick" for being the only public official with the courage and principles to speak out against the Cox party line on IFRS adoption and PCAOB inspection (or lack thereof) of foreign firms. Niemeier must have known that his open defiance would ultimately lead to the loss of his seat on the PCAOB, worth over $500K per year. Even for a Charles Niemeier, it is not a trivial matter to replace that kind of money and status.

Second, Niemeier may be one of the few qualified individuals who does not have strong ties to the Big Four. Mind you, off the top of my head I can think of at least three former Big Four partners who became Chief Accountant, and each of whom I respected and admired for their commitment to investor protection. Notwithstanding these talented and principled individuals, I don't think it would be advisable or appropriate to pick another of from that background given the current environment. The pressures on the audit industry, and its own lobbying efforts, are too intense. Mary Schapiro could not justify taking the risk that a recent alumnus of the Big Four, Five, Six, etc. would yield to the temptation to carry water for old buddies and erstwhile partners. It may not even be possible for such an individual to be mentally re-programmed from auditor/preparer advocate to investor advocate. (Apologies to all of my friends who work as auditors, but I can't think of another way to put it.)

Third, I dig what he preaches. Niemeier sees no good reason for the SEC/FASB to punt the authority to set accounting rules to the IASB, other than to feather the beds of executives and auditors. Fair value accounting is a tough issue, but he is not afraid to stand up to those who would compromise truthfulness (notice I don't say "truth") in accounting for the twisted logic that somehow being less than that  helps to make capital markets more stable and secure.

If Schapiro does eventually make Niemeier the Chief Accountant, the likelihood of IFRS adoption, even in the eyes of its most ardent supporters, will have slid from "inevitable" to "over my dead body."  In a much larger sense, we will have an unequivocal signal that the old gang in possession is not being replaced with a new one.  

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*The Pentagon Papers: The Defense Department History of United States Decisionmaking on Vietnam, Senator Mike Gravel Edition, Beacon Press, 1971.

1 Comment

  1. Reply Darrell Williamson March 5, 2009

    I think the title in the URL of this editorial from Accountancy Age is telling enough:
    http://www.accountancyage.com/accountancyage/comment/2236761/schapiro-stance-threat-recovery
    It appears those who would question a rush implement IFRS are now a threat to an ecomonic recovery and considered to be “protectionist”.
    It is sad that the dabte over what constitutes the best way forward with respect to our accounting standards is becoming politicised in this manner. I would hope that those with our best interests in mind would try to rise above the fray and take positions of substance in this debate versus the use of ill-conceived political rhetoric.

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