Notes on “A U.S. Imperative: High-Quality, Globally Accepted Accounting Standards,” a recent public statement by outgoing SEC Chair Mary Jo White
Regardless of what the title may seem to promise, it’s as bland a “statement” as you’ll ever come across, lacing even the hint of a distinctive thought, insight, or turn of phrase (by comparison, one might come to cherish the oddities I’ve often pointed out in Hans Hoogervorst’s speeches). The following extracts will amply convey this:
- “The strength of the U.S. capital markets depends on investors knowing that they can rely on the financial information that is available to them when they make investment decisions. High-quality accounting standards are the foundation upon which this reliance is built. The Commission has an important responsibility to investors and our markets to ensure that the accounting standards reliably produce the information our markets demand.
- U.S. Generally Accepted Accounting Principles (GAAP) are the accounting standards forming the bedrock of the U.S. financial reporting system. They are established and maintained by an independent standard-setter, the Financial Accounting Standards Board (FASB). Although U.S. GAAP continues to serve well the interests of investors and others stakeholders, it does not diminish the need – in the United States and abroad – to continue to work hard to support the development of high-quality, globally accepted accounting standards.
- We all, particularly U.S. investors and companies, have a very strong interest in such standards. Global standards facilitate decision making about cross-border investments, transactions, and acquisition opportunities. Standard setters and the Commission also have a strong interest in building and maintaining high-quality standards that can be applied comparably across borders to better inform and protect investors.
- … As I approach the end of my tenure, I remain firmly convinced of the importance for U.S. investors of high-quality, globally accepted accounting standards, and I believe that the Commission must continue to pursue such standards as one of its highest priorities. I urge the next Chair, working together with a full Commission, to speak again on this issue and agree on a path forward to most effectively advance this critical objective. It is imperative for the protection of U.S. investors and companies and the strength of our markets.
- …Building high-quality, globally accepted accounting standards also requires the continued commitment of the Commission, both in its public support and in its efforts to facilitate the development of strong standards by both the FASB and the IASB. In particular, the Commission, in addition to its strong support of these efforts generally, should be particularly sensitive to monitoring how the needs and interests of investors and issuers may change in the future and seek opportunities to guide and accelerate the development of high-quality, globally accepted accounting standards. This objective continues to be central to the SEC’s mission to protect investors.”
It’s all so dull and pointless that it would hardly be worth commenting on, if not for the oddity that it exists at all. A couple of Twitter commentators summed this up succinctly.
- Jack Ciesielski: Strange. MJW didn’t push very hard for IFRS during tenure but makes statement “for” at exit. Why now? Regret?
- Andrew Ackerman: If IFRS is such an “imperative,” why hasn’t Mary Jo White done anything to advance them?
I don’t know the answers of course, but it’s appealing to think it’s a “legacy-protecting” move of the same kind that marked Barack Obama’s last weeks in office. As I’ve written before, the Trump view of the world seems to embody an inherent resistance to the very philosophy that underpins the IFRS project. All of Trump’s decisions so far, reflecting his own nature, evidence a deep hostility to reflection, expertise, and to anything that might be considered even vaguely technocratic or “progressive.” Trump’s anti-intellectualism is so odiously extreme that it provides a rationale for diluting the standards of any aspect of public life: news reporting, intelligence gathering, scientific verification, and so on. By its nature, as I said before, financial reporting isn’t likely to be very high on any regressive tyrant’s to-do list. But if some poisonous right-wing obsession were to develop regarding any aspect of US GAAP (it’s too long, too expensive, too intrusive, generally anti-American) would you be even slightly surprised if that were to change?
Against that backdrop, one might read White’s statement as an assertion that even if she didn’t do much to push toward convergence, she wasn’t regressive either. In challenged times, maybe it’s enough that you kept the candle faintly burning; never mind that you failed to start a bigger fire. If a debacle lies ahead in the quality of US financial reporting, she’s drawn the line that says: it didn’t start here. And if that’s in any way her motivation, even if it’s somewhat unconscious, I certainly wouldn’t blame her. She notes in her conclusion: “The United States cannot afford to be myopic about this issue in light of the benefits of these efforts for all stakeholders. Strong support of both the FASB and the IASB by U.S. investors, companies, auditors, and others, including the Commission, is essential.” But consequences be damned, the US seems to be marching into a time where it classifies myopic darkness as the new light…
The opinions expressed are solely those of the author