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FEI Summary of Current Issues In Financial Reporting, Nov. 16-17

[print version]

Financial Executives International (FEI) Presents its 28th Annual

Current Financial Reporting Issues (CFRI) 2009 – Nov. 16-17, Marriott Marquis, New York

FEI Summary

 

Financial Executive’s editor attended the two-day conference and has distilled some key points from several of the sessions. To be sure, this is only a small part of what those who attended the conference have learned.

 

It was apparent that financial executives have a sense of humor about their work – even as they conduct their tasks in these unprecedented times. In two instances, comments made on day one in separate sessions were repeated in subsequent sessions: One referred to the target date for the U.S. Securities and Exchange Commission to comment on moving toward International Financial Reporting Standards in the United States (or not!), and one on the controversial direct-cash flow reporting method, which the Financial Accounting Standards Board and International Accounting Standards Board plan to propose in the Financial Statement Presentation project. One bit of key information participants waited for (and will have to continue to wait for), as evident from the attention and then questions as each of the participants from the SEC spoke – was a date certain for whether the United States will move from U.S. generally accepted accounting principles to IFRS.

 

DAY ONE

FEI President and CEO Marie N. Hollein greeted the packed ballroom of more than 750 by saying, as attendees have come to expect, the FEI 28th annual conference will provide an “unprecedented opportunity to hear from those who are making the rules – and, in some cases, the principles!"

 

Describing the current environment, she said: “The past 18 months – and certainly the 12 months since CFRI 2008 – can, for many of us, be considered one of the most difficult and challenging times in our careers. The ripple effects from the credit crisis, the impact of the dollar, the volatile economy, a new administration in Washington, potential health-care 'reform,' mandates and taxes on businesses to pay for them, potential cap-and-trade legislation, the supposed role accounting has played in the credit crisis and the potential financial regulation – as well as the political pressures on the two main accounting standard-setters. Oh, and the fact that the move – or not – to converge U.S. GAAP with International Financial Reporting Standards – known as IFRS – is still uncertain in the U.S. Did I leave anything out?”

 

Ken Kelly, senior vice president and controller for McCormick & Co., and the 2009 conference chair welcomed attendees and told them they would receive key insights from this year’s sessions, including a comprehensive year-end update on issues impacting FASB, the SEC and IASB.

 

The keynote opening speaker Ron Insana characterized the financial world of the last couple of years as an understatement in “fascinating and frightening.” An observer or participant in the financial markets for more than 25 years, Insana, who is a senior analyst for CNBC, said for those working through it now, “there’s no greater challenge than the crisis we’re emerging from.” And though, he said, the “worst is behind us – after those tense moments after the March abyss -- we can see 2010 in a more positive vein.”

 

Of the crisis, he said there was no shortage of individuals who abandoned managing risk, which has resulted in the worst recession our nation has faced since the 1930s. And, in a kind of nod to the Federal Reserve, he said, “enlightened policy ultimately saved the day.” The Fed’s Chairman, Ben Bernake, he noted, has been training his whole life for such a moment, having studied the Depression. Letting Lehman fail, he said, was the “biggest economic policy mistake in history.”

 

Responding to a questioner on how financial journalism has changed, Insana concurred, that this new error, which is now personality driven with much news and opinion, “is not going away.”

 

During the conference’s first general session, ”FASB/IASB Technical Accounting Update,” moderator Gary R. Kabureck, Xerox Corp. vice president and chief accounting officer, introduced his panel and spoke of the myriad tasks ahead for finance executives. FASB Chairman Robert Herz reiterated the need for getting to a “high-quality global reporting system” that would be of value for capital markets and companies. He noted, however, that while more than 100 countries are using IFRS – some “as published by IASB – that to date, the two largest economies, the U.S. and Japan, are still not onboard. Japan is reportedly moving toward IFRS by 2015. He said “the more universal the rules, the better the application,” referring to the various countries applying local interpretations as variations of the “ideal.”

 

Patrick Finnegan, a board member for IASB, represented the IASB and Russell R. Golden, technical director, FASB also participated in the lively discussion of FASB activities.

 

On waiting for a statement from the U.S. Securities and Exchange Commission, Herz reminded the audience that the SEC has said it would comment in the “fall.” This, quipped Herz, means they have until 9 a.m. on Dec. 21 – a comment that was repeated by others during the course of the two-day conference.

 

The second general session, “The Challenges of Financial Reporting in Today’s Environment,” was moderated by Frank H. Brod, corporate vice president, Finance and Administration, Microsoft Corp., as he both opened and closed the session speaking about the level of stress in today’s environment. The panel of three consisted of Heather Bellini, senior managing director, ISI Group Inc.; Sam Ranzilla, national managing partner Audit Quality and Professional Practice, KPMG LLP; and Larry Salva, senior vice president, chief accounting officer and controller, Comcast Corp. Among the areas covered: audit committees, management/auditor relationships, enterprise risk management (ERM), accounting for business combinations, auditor fees, disclosure, financial statement presentation

 

DAY TWO

SEC Chief Accountant in the Office of the Chief Accountant James Kroeker and Wayne Carnall, chief accountant, division of Corporation Finance, discussed several items on the SEC agenda. Kroeker began with a statement about the OCA’s goal to be “collaborative” both within and outside the SEC.

 

Among the areas he covered: IFRS, he said, “continues to be a priority for us.” He said his staff is working on a work plan to develop follow up on issues identified in comment letters (of which about 238 were received). While there is “strong agreement” for the idea of a single set of accounting standards to be used around the globe, he said, there are a “range of views as to how to best accomplish: Is it a practical view?; move right away to IFRS; needs to be further action on convergence before SEC mandates; need a date certain;” and more. He said he’s “encouraged by the two boards recommitting to convergence efforts.”

 

So, what should companies be doing in the meantime? Kroeker said it’s understood if there were a move to IFRS companies would need awareness and ample time to prepare – systems, human capital, understanding, convergence projects – and that they should continue to monitor projects on IASB activities and even comment “on those you want to.” He noted IASB was “taking the lead on some standards.”

 

The final keynote speaker, SEC Commissioner Kathleen L. Casey, in speaking from a script, shared details of a recent study of an international joint working group which she and Comptroller of the Currency John Dugan participated on. Separately, alluding to potential amendments in Congress that may create a role for a systemic risk council relating to accounting standard-setting, she reiterated that accounting standards must be focused on investor needs and where there are conflicts – such as between systemic risk regulation and investor protection - investor interests must prevail. Regarding IFRS, Casey reiterated what was said several times during the two-day conference that the Commission supports a single set of high-quality accounting standards and is still presently assessing the question of whether to extend a mandate. Indeed, she said, the SEC “would be remiss and fail investors if we don’t continue to support a single set of accounting standards. In addition, she said the SEC “strongly supports the efforts of the IASB and FASB.”

 

On other matters, Casey said comments from new rules proposed by the SEC in the summer on CD&A (compensation discussion and analysis) have been “thoughtful and helpful.” And she described some of the latest developments in using interactive data, eXtensible Business Reporting Language (or XBRL) for financial reporting. Starting with fiscal periods ending on or after June 15, 2009, the commission's rules require some public companies to submit their financial statements in the XBRL interactive data format.

 

Read Commissioner Casey's full speech here.

 

Additional highlights from CFRI can be found in the FEI blog, at www.financialexecutives.org/blog.

 

Financial Executives 4th Annual FEI Hall of Fame – Mon., Nov. 16

For the fourth year, Financial Executives International’s Hall of Fame Awards coincided with FEI’s Current Financial Reporting Issues conference, in New York. This year’s black-tie gala induction had an elegant venue, The New York Palace Hotel. Attendees entered the hotel courtyard on a red carpet flanked with special FEI signage lights. The sold-out fund-raising event was host to 250 who enjoyed cocktails and hors doeuvres before moving to dinner, which was followed by the induction of Dennis D. Dammerman and Donald T. Nicolaisen, who joined nine HOF peers who received this prestigious honor in past years.

 

Bob Pisani, CNBC’s “On-Air Stocks” editor, served for the second time as master of ceremonies of the event. The FEI Hall of Fame was started in 2006 as a way to honor individuals with a career history of strong leadership, ethics and innovations and values that have been critical to FEI since its founding 78 years ago. The event is a fundraiser for Financial Executives Research Foundation, known as FERF, which is celebrating 65 years of research.

 

Frank Brod, corporate vice president, Finance & Administration and chief accounting officer, Microsoft Corp., the event’s premier sponsor, said “Microsoft is proud to sponsor the FEI Hall of Fame,” and that it was a perfect match for Microsoft to associate itself with the two inductees tonight.

 

Some comments from this year’s inductees:

Dennis D. Dammerman:, former vice chairman of the board and executive officer of General Electric Co., said “Thanks for bestowing this honor on me.” He thanked Frank Borelli, an FEI Hall of Famer member, for nominating him. He says it was Borelli who let him know about FEI early in his career and that being inducted into the HOF was an “honor for me, many of the people in the audience important to me – both friends and business associates.”

 

Donald T. Nicolaisen: Recalled 11 years ago, the last time he spent a weekend at The Palace, when PwC was in the midst of a merger with Coopers & Lybrand. He reminisced about growing up without big role models and how his life has given him “unbelievable opportunities.” He’s learned, he said what it meant to work with a firm of “integrity and diversity” and the role of serving clients.” His father, he said told him, “I don’t want to hear you complain. Do something about it.” He said he’s “humbled by the award,” and he applauded FEI’s achievements.

 

Introducing Dammerman, Laurence D. Fink, chairman and chief executive officer, BlackRock Inc., (where Dammerman serves on the board) said: “His desire to be involved and make an impact” as well as “his experience has benefitted our employees and the companies we’ve been associated with.”

 

Introducing Nicolaisen, Dennis M. Nally, chairman, PricewaterhouseCoopers International Ltd., referred to Nicolaisen as a “rock star of the accounting profession” and “the guy you want on your team.” Recalling a self-evaluation written by Nicolaisen in his early years at PwC, Nally said it read: “I want to be in a position where I can make a difference.”

 

Ellen M. Heffes

[print version]



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