FASB, SEC officials tell IROs what’s in store

Jun 10, 2008

Dizzying reporting and accounting update for NIRI’s big annual conference

SAN DIEGO -- FASB chairman Bob Herz teasingly told IROs convened for NIRI’s 2008 annual conference yesterday to ‘buckle their seatbelts’ for his headline address on ‘the next chapter’ in the world of financial reporting and accounting. But he actually did have quite a bit of riveting news for them to contemplate.

His remarks focused on accounting convergence as many more of the world’s major economies move to international financial reporting standards (IFRS). Herz said IFRS is coming for US companies, probably within three to five years. What’s more, standard-setters aren’t in favor of a lengthy adjustment period. ‘It will be a swift change to IFRS,’ he said. ‘[Having a choice between US GAAP and IFRS] might be an interim step, but it creates a two-language reporting regime.’

Policymakers are holding a key meeting in New York next week to work on a blueprint for how IFRS adoption would work here. Investor groups as well as representatives of the corporate world will be represented.

Herz also addressed the controversy over mark-to-market accounting which has been rough on more than a few corporate balance sheets since FAS 157, a new accounting standard, went into effect in late 2007. He acknowledged that it is ‘often difficult’ to put market prices on assets, particularly in a credit crisis, and that disclosure ‘may involve some ranges.’ But he said he supports expanded use of fair value. ‘All surveys of investors say there ought to be more fair value accounting, not less fair value,’ Herz said.

SEC corporation finance director John White followed Herz with a similarly newsy address. He said he was encouraged by a NIRI survey noting that large numbers of companies were looking at adopting e-proxy as a way to disseminate investor documents. But he acknowledged that so far it hadn’t been trouble free.

A particular worry is the drop-off in the retail vote. The SEC is looking at what more can be done with the initial notice of internet access of proxy materials, which smaller investors seem to be missing or not understanding. Companies have asked for permission to send more explanation along with the notice, he said, but that opens up holes: ‘It’s tricky in terms of defining what is educational. It’s an issue we are aware of and studying.’

White, noting how many IR events are now webcast, also said the SEC wants to further encourage the use of corporate websites for investor communications. But he said there’s understandable trepidation since things like employee blogs and third-party hyperlinks pose liability issues.

He promised new guidance on disclosure via corporate websites, which hasn’t been updated since 2000. In this guidance, the SEC will address whether posting disclosure documents on a corporate website satisfies Reg FD. The idea has been a hot one since Sun Microsystems began asking about the appropriateness. White called it ‘a very fair’ question.’

‘A one-size-fits-all approach is not the way you are going to be looking at it. We should be able to come up with some help in this area,’ he said.

NIRI’s annual conference continues through Wednesday, June 11.

By Anna Snider