Financial Executives International (FEI) Presents
Current Financial Reporting Issues (CFRI) – Nov. 17-18, Marriot Marquis, New York
3rd Annual FEI Hall of Fame Gala – Nov. 17, New York Stock Exchange
FEI Summary
Financial Executive’s editors attended the two-day conference and have distilled some key points from several of the sessions. To be sure, this is only a small part of the content those who attended the conference have learned.
DAY ONE
FEI President and CEO James J. Abel greeted the packed ballroom by saying that as much as things are always changing – and never more so than during the current global crisis – one thing that remains is FEI’s annual Current Issues in Financial Reporting conference, which has taken place for the last 27 years. Also, he said, the conference is always a “must-attend” event for the preparer community, and this year was no different.
“In this environment, it’s critical to stay on top of all the key issues that come before the regulators and standard-setters that will help mold the financial reporting future and what they mean strategically to your organizations.”
Loretta V. Cangialosi, vice president and controller, Accounting Services at Pfizer Inc. and the 2008 conference chair, then told attendees they would receive key insights from this year’s sessions, including a comprehensive year-end update on issues impacting the Financial Accounting Standards Board, the U.S. Securities and Exchange Commission and the International Accounting Standards Board.
Speaking on “Bringing Transparency to Financial Reporting: An improved Accounting Framework for the World’s Integrating Markets,” keynote speaker Sir David Tweedie, chairman of the London-based International Accounting Standards Board, focused on why the United States should converge U.S. generally accepted accounting principles and international financial reporting standards.
Globalization, he said, and the need for global capital would benefit from a single set of standards so that transactions are the same –- whether in Brussels or Boston or Beijing. Such consistency contributes to making strong, stable capital markets. People wouldn’t have to trade in “umpteen standards.” And, since neither IASB nor the U.S. Financial Accounting Standards Board had the best standards, converging was the way to go.
“Unfamiliar standards lead to a risk premium,” Tweedie said. “Do you really understand Chinese standards? What about Korea?”
Nearly 150 nations will be using IFRS by the end of 2011, according to Tweedie, with a likely result of accounting that is more “tell it as it is.” In his presentation, which was peppered with jokes and quips, he stressed that “accounting is not rocket science.”
Tweedie also said that it’s important to develop standards that make intuitive sense. “If complexity is to be avoided, we have to avoid exceptions,” he said.
During the conference’s first general session, ”Developments in International Standards: FASB and IASB 2008,” moderator Gary R. Kabureck, Xerox Corp. vice president and chief accounting officer, joked that Tweedie and Financial Accounting Standards Board Chairman Robert Herz were standing at “dueling podiums” on either side of the stage while Russell R. Golden, FASB technical director, sat in the middle.
In their tag-team presentation, however, the two chairmen noted that they were working together to publicize the benefits of IFRS, which they said are fundamental to achieving a high-quality global reporting system. Global standards would also attract more investment through transparency, reduce the cost of capital and increase world-wide investment.
FASB’s Herz noted that the SEC had released its proposed IFRS Roadmap last Friday and that the commission has been working for years toward convergence of global standards. “My personal hope is that we continue down this path and that we continue strongly,” Herz said, adding that the current economic crisis clearly shows the “interconnectedness” of the world’s financial markets.
The second general session, “Controllers’ Roundtable,” was moderated by Thomas M. Tefft, vice president and controller of Medtronic Inc. Tefft started the discussion by asking the panelists what was currently keeping them up at night. Talia Griep, vice president and controller of Honeywell International Inc., said the general direction of the economy was topping her worry list. In addition, Griep expressed concern about trying to implement major new accounting standards (read: IFRS) in a difficult economic environment with fewer resources.
Nick Cyprus, controller and chief accounting officer of General Motors Inc., said: “What I don’t know that sits on the balance sheet.” Cypress stressed that it’s important to understand where your firm may have hidden impairments. “Don’t get surprised at year-end,” he advised. “Get started now with your auditors.”
Joseph F. Durko, vice president, controller and chief accounting officer of Standard Microsystems Corp., responded to Tefft’s next question: “How else has your job changed?” Durko said he’s been forced to redirect the focus of a lot of “talented accountants” in his department. “We’re struggling with sacrificing the future to manage the present,” he said.
-- Marian Raab
DAY TWO
Billie K. Rawot, vice president and controller, Eaton Corp., introduced the second session of the morning, “Update on SEC Developments.”
Conrad W. Hewitt, Chief Accountant, Office of the Chief Accountant, U.S. Securities Exchange Commission, said the “global recession shows how interconnected we are and how important global financial report is.” He said he’d discuss three key items that he’s been dealing with for the past two years in the Office of Chief Accountant (OCA): the SEC’s Committee on Improvements to Financial Reporting (CIFiR), Interactive Data (read: eXtensible Business Reporting Language, or XBRL), and International Financial Reporting Standards (IFRS).
He accepted the position at the SEC since he agreed there was much complexity in financial reporting and wanted to do his part. He then got “sidetracked,” dealing with issues related to changing Auditing Standard 2 to 5, interpretive guidance and stock-option backdating. He says CIFiR was successful in its recommendations for reducing complexity and improving financial reporting and that most are in process.
John W. White, director, Division of Corporation Finance, SEC –- who has already announced he will be leaving the commission at the end of the year –- said his department was dealing with four priorities: implementing IFRS, the market crisis and role of corporation finance, transparency initiatives and “others.”
On the market crisis, he said that during the past 11 weeks –- since the Tuesday following Labor Day –- the primary focus has been to “facilitate capital raising and strategic transactions.”
He said they responded in hours to transactions that might normally take months to complete. We “didn’t want the regulation process to stand in the way of companies that need to raise capital.”
The keynote speaker, SEC Chairman Christopher Cox, opened by saying, “FEI does an extraordinary amount of good work that benefits investors throughout America and around the world.” And, he continued “our markets need your work now more than ever to reinforce the highest standards of financial reporting and integrity.”
Cox also commented on the important role of the U.S. “While the United States has some obvious and correctable regulatory gaps, we have also set the highest regulatory standards for our markets of any country on earth. We should use the power of those markets to help raise world standards — which is the aim of our nascent mutual recognition initiative.
“The flight to quality that is currently underway is but the latest reminder that in the long run, countries can only win the global competition for capital by protecting investors with stronger, more transparent markets. It is not mere coincidence that the world's largest capital market, by far, also has the world's highest standards.”
Cox’s speech is posted on the SEC Web site and can be accessed here.
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FINANCIAL EXECUTIVES INTERNATIONAL HALL OF FAME AWARDS – Mon., Nov. 17
For the third 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 induction event could not have had a more fitting venue to depict the finance profession: the New York Stock Exchange. More than 200 attending the fund-raising event enjoyed cocktails and hors d’oeuvres right on the trading floor of the famed Big Board and then moved to another room for dinner and the induction of Susan Schmidt Bies and John F. Ruffle, who joined seven HOF peers.
The premier event sponsor was Microsoft Corp.; gold sponsor, Zurich Financial Services and silver sponsor, Deloitte. Other firms and several FEI Chapters were also sponsors.
Bob Pisani, CNBC’s “On-Air Stocks” editor, served as master of ceremonies of the ceremony. 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 77 years ago. The event is a fundraiser for Financial Executives Research Foundation.
Some comments from those in attendance:
Susan Schmidt Bies: “FEI was important to me in achieving what I have in my career,” and spoke about the days when she was active in the Memphis Chapter. Referring to the current financial turbulence, Bies said, “Many things lately are extreme forms of what we’ve experienced before; unfortunately many of us forgot to pass those lessons on to those who succeeded us.” History repeats itself, she warned, and encouraged FEI to “continue its work.”
Jack F. Ruffle: said being chosen for the award was an “honor” and that he “feels humbled being recognized by my peers.” In his opening statement, referring to the current financial crisis he was worried in 1989 about the consequences of risk and that we need to “learn from are mistakes –- the markets cannot do it alone.”
Christopher Cox, chairman, U.S. Securities and Exchange Commission: “It’s a great show of affection for Jack and Sue, who’ve been outstanding leaders in the financial community for many years and are models for both private and public leadership we would all do well to emulate.” Further, he praised FEI for the “work it does, and FERF. Also, he said “FEI is extraordinarily supportive to America’s investors and to our markets.”
Introducing Bies, Cox said she is a “model of diplomacy, integrity and talent” and that “no one is more deserving than Sue, who’s served for “more than four decades as a powerful voice for integrity.” Indeed, he said, “every saver and investor owes you gratitude.”
Benjamin R. Civiletti Esq, U.S. attorney general under President Jimmy Carter, in 1979-81, introduced Ruffle saying they had been friends more for than 50 years. He praised his friend as a “rare an unusual” man who had succeeded in the finance profession and as a board member since, he “had the courage to stand up. Civiletti says he wishes he could have “cloned [Jack] on Wall Street, 10 years ago.”
Joseph DiLorenzo, FEI chairman: “It’s wonderful to be here on the floor of such a great symbol of finance and capitalism to honor two more of the profession’s most-esteemed members as they join their seven peers.” He added that he’s “particularly proud to be FEI’s chairman this year – with two such prestigious honorees.”
-- Ellen M. Heffes