Post the Convergence Mania: The New Revenue Recognition Standard Will Do Much More Harm than Good
A journey through recent accounting time... It’s 2002 The Accounting Establishment declares that convergence of FASB and IASB rules is “inevitable.” At the top of a very long convergence to-do list is revenue recognition. It so happens that from decades of…
On Its “Materiality” Proposals, Will the FASB Heed the Handwriting on the Web?
As I described in a previous post the FASB has two related proposals on the table related to materiality and financial statement notes: An amendment to Concepts Statement No. 8 to replace its ersatz definition of “materiality” — nothing but a re-phrasing…
Long on “The Big Short”
With the Oscars nigh upon us, I should tell you that I fell short of my goal to see The Big Short. How did subprime mortgages morph into weapons of mass financial destruction? How did a self-anointed few amass untold obscene…
Classification of Debt Prepayment Costs in the Statement of Cash Flows: What was the EITF Thinking?
I have been teaching undergraduate “Accounting Theory” for the past three years. For reasons that I will explain below, I choose to begin the course by exploring differences between accrual accounting and cash flows; and relatedly, how to analyze a statement of…
FASB Fiddles (Again) While Banks Burn (Us Again)
While on the cusp of one more financial crisis, the time has come to ask yet again: What is the FASB accomplishing that will fix the deeply flawed accounting by banks for loan losses? Answer: nada, nichts, bupkis, absolutely nothing. Instead, the FASB has been wallowing…
Reining in “Non-GAAP Financial Measures”
At the recent AICPA-sponsored mega-conference on SEC and PCAOB developments (see KPMG’s summary, here), the SEC staff, and even its chair, devoted a significant amount of bandwidth to non-GAAP measures of financial performance. Some see this as part of the ongoing…
“Fairly Presented” in the Auditor’s Report—Puffery or Principle?
From the preface of Political Standards: Corporate Interest, Ideology, and Leadership in the Shaping of Accounting Rules for the Market Economy: "In subtle but significant ways, our corporate accounting system has been captured…. [T]he evidence of capture in accounting rule-making…
FASB’s Proposed Materiality “Clarifications” are Backfiring
Something must have happened between my post criticizing the FASB’s proposals to reduce materiality to a legal exercise and last week’s meeting of the SEC Investor Advisory Committee. Just prior to the meeting, discussion of the proposals became an agenda…