CAQ Urges Congress to Reject Proposals to Suspend Mark-to-Market (Fair Value) Accounting

The CPA profession is rallying to the defense of fair value accounting.

Floyd Norris at the New York Times has termed the Congressional calls for abandoning mark-to-market “the political lynching of truth-telling in accounting.” He’s right; here the facts, from the Center for Audit Quality, in a letter to Congress today.

September 30, 2008

Dear Member of Congress:

The Center for Audit Quality (CAQ) believes that proposals advocating suspension of mark-to-market (or fair value) accounting are not in the best interest of investors or the capital markets and should be rejected.

The principles of mark-to-market accounting are rooted in the fundamental virtue of transparency and are central to informed market decisions and efficient allocation of capital. In our view, investor confidence would be undermined by efforts designed to mask the actual value of financial assets at a given point in time.

It is important to underscore that mark-to-market accounting has contributed positively to revelations about the severity of the economic crisis facing our country’s credit markets and certain institutions, but it did not create the economic crisis.

Recently, some have suggested that the Securities and Exchange Commission (Commission or SEC) or the Financial Accounting Standards Board (FASB) should suspend the application of mark-to-market or fair value accounting or somehow impose a moratorium on mark-to-market requirements for certain financial institutions when preparing financial statements to be used by investors.

Although determining fair values for financial instruments in an illiquid market can be challenging, the best estimate of the prices that would be received for such instruments in orderly transactions occurring at the measurement date remains the most relevant information for investors and policymakers. To lessen the uncertainties about the value of these securities, it is critical that investors continue to have the insight provided by the application of mark-to-market accounting principles.

Many of the current requirements stem from the Savings & Loan crisis in the 1980s, when we learned that not knowing the real, current values of financial instruments held by financial institutions can be devastating when the bubble finally bursts and institutions are forced to close their doors. The current requirements provide a uniform and consistent method to measure market values and provide investors increased disclosures about those measurements. Suspending mark-to-market accounting would throw financial reporting back to a time of less comparability, less consistency and less transparency.

If there are concerns with the impact of asset valuations on capital requirements of financial institutions, regulators have alternatives other than obscuring information relevant to investors. Regulators may modify those requirements based on criteria other than fair value accounting measurements to the extent they deem appropriate.

Other capital markets participants also have expressed concern about the lack of transparency that would be created by a suspension of mark-to-market accounting. The Council of Institutional Investors, which represents 130 public, corporate and union pension funds with combined assets of more than $3 trillion, stated in a recent letter to the SEC that “[a]ny termination or suspension of fair value accounting will lessen transparency and investor confidence in the capital markets at a time when such confidence is critical to the stability of our markets and the overall economy.”

Likewise, the CFA Institute, a global, professional association of more than 97,000 investment professionals with offices around the world, recently wrote to both members of Congress and the SEC and noted that “[c]easing fair value reporting will only serve to undermine the confidence of investors in our financial institutions and lead to a further crisis of confidence in our government and the regulatory bodies overseeing those institutions.”

The proposed Emergency Economic Stabilization Act of 2008 restates the authority of the Commission to suspend the application of Statement of Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157), and requires that the Commission conduct a study on the effects of FAS 157 on financial institutions’ balance sheets, the impact of such accounting on bank failures in 2008, the quality of financial information available to investors, and other matters, and report its findings to Congress within 90 days. While a restatement of existing SEC authority and a study of mark-to-market accounting and its effects are not necessarily harmful in their own right, efforts to weaken the transparency provided by the current standard should be avoided, especially in this time of financial instability.

The CAQ would be pleased to discuss with you any of the points in this letter at your convenience.

Sincerely,
Cynthia M. Fornelli
Executive Director
Center for Audit Quality

Cc: Henry M. Paulson, Jr., Secretary, Department of Treasury
Ben S. Bernanke, Chairman, Federal Reserve
Christopher Cox, Chairman, SEC
Mark W. Olson, Chairman, PCAOB
Robert H. Herz, Chairman, FASB
All Members of Congress

The CAQ is an autonomous public policy organization serving investors, public company auditors and the capital markets and is affiliated with the American Institute of CPAs. The CAQ’s mission is to foster confidence in the audit process and to aid investors and the markets by advancing constructive suggestions for change rooted in the profession’s core values of integrity, objectivity, honesty and trust. Based in Washington, D.C., the CAQ consists of approximately 800 member firms that audit or are interested in auditing public companies.

Bookmark and Share

Posted on September 30, 2008
Filed Under BSG [CPA TRENDLINES] | Leave a Comment

CPA Advice After the Market Meltdown

CPAs work to quell client fears.

What’s the CPA outlook? Join the survey; get the results.

by Rick Telberg
At Large

If you’re not concerned by the meltdown on Wall Street, you’re probably not paying attention.

Or, you just may be getting advice and financial planning services from a few of the leading CPA financial planners we’ve been hearing from. Nearly every CPA we’ve been hearing from has been rattled by the events in the financial markets, but each has also remained calm and confident that, with the right planning and preparation, his or her clients should be able to weather the worst of the storm with minimal damage.

“Everybody should be concerned,” agrees Michael E. Goodman, CPA, CFP, PFS, at Wealthstream Advisors Inc. in New York, “These are historic times in the financial industry. Several companies that we view as institutions made bets that were riskier than they thought. And many other institutions got caught in the downdraft because they did not evaluate or understand the risk that some of these other companies were taking.” Read more

Bookmark and Share

Posted on September 29, 2008
Filed Under BSG [CPA TRENDLINES] | 2 Comments

Habif Arogeti Sells Stake in Wealth Management Unit

iPro One buys into Tegra. Deal is second for iPro One. Hill, Barth & King LLC was first.

New York-based iPro One, Inc. (http://www.iproone.com) says it has reached an agreement to acquire a minority ownership interest of Tegra Financial Partners, an affiliate of Habif, Arogeti & Wynne LLP (HA&W), Georgia’s largest independent accounting firm and one of the country’s top 100 CPA firms.

Tegra Financial Partners is a full service wealth management firm with more than $400 million supervised assets under management (AUM). Terms of the investment were not disclosed.

iPro One’s investment in Tegra Financial Partners follows its recent ownership interest acquisition of HbK Sorce Financial LLC (HbK Sorce), an award-winning investment advisory and wealth management firm with more than $1 billion in AUM. HbK Sorce is an affiliate of Hill, Barth & King LLC (HbK), the 66th largest CPA firm in the U.S. Read more

Bookmark and Share

Posted on September 27, 2008
Filed Under BSG [CPA TRENDLINES] | Leave a Comment

What the “Top 100 People” are reading

You’re doing what some of the most influential people in accounting are doing… reading CPA Trendlines.

In the 2008 edition of the Accounting Today Top 100 People in Accounting, the editors report on the VIPs’ favorite blogs.

Also mentioned:

It’s nice to see the Accounting Today Top 100 People feature looking so good. Kudos to Editor Bill Carlino and Managing Editor Dan Hood.

Bookmark and Share

Posted on September 27, 2008
Filed Under BSG [CPA TRENDLINES] | Leave a Comment

Top 100 Firms Headed for Slowdown?

CCH’s Top 100 CPA firms posted a third year of double-digit growth. But the report’s authors see signs that the run could be coming to an end.

This year marks the first time CCH’s Public Accounting Report Top 100 firms posted a three-year streak of double-digit revenue growth rates since 1999, 2000 and 2001.

The PAR 2008 Top 100 found an average revenue growth rate of 11.4 percent, up from a growth rate of 10.8 percent in 2007.

As in previous years, firms outside the Big Four posted stronger overall results than their larger counterparts, with non-Big Four firms growing their revenue at an average rate of 14.4 percent compared to 10.6 percent for the Big Four. For 2008, the Top 100 actually includes 102 firms, with a three-way tie in revenue for the last spot on the list.

In addition to revenue growth rates for overall firms, composite net revenue per partner also rose to more than $2.87 million, a 6.3 percent increase over the previous year, while net revenues per professional for firms in this year’s top 100 increased 4 percent to $320,194 compared to those firms’ previous performance, according to PAR 2008 Top 100 results. Read more

Bookmark and Share

Posted on September 26, 2008
Filed Under BSG [CPA TRENDLINES] | Leave a Comment

Bloomberg TV: More bad news


Initial Reaction with Mickey Levy of Bank of America; Further Reaction with Ben Lichtenstein of Traders Audio.com

Transcript: Read more

Bookmark and Share

Posted on September 25, 2008
Filed Under BSG [CPA TRENDLINES], Video | Leave a Comment

Sign of the Times: Forensic CPAs in High Demand

Two thirds of practitioners report gains.

Two out of three CPAs polled (68 percent) say their forensic practices have grown over the past year, according to a survey by the American Institute of Certified Public Accountants.

“The survey findings tell us that not only are forensic accounting services in demand, but specifically that CPAs with this expertise are in high demand,” said Stephen Winters, AICPA director – firm practice management and specialized communities.

Read more

Bookmark and Share

Posted on September 25, 2008
Filed Under BSG [CPA TRENDLINES] | Leave a Comment

Starting pay for new accountants lags other college grads

The average salary offer to freshly graduated accounting majors increased 3.7 percent to $48,020.

But that increase is considerably less than some other business majors.

As a group, business disciplines posted increases across the board, and the overall average salary offer to these majors was up 5.7 percent over last year’s average of $44,287, to $46,800.

So, again, we ask, if there’s really a shortage of new recruits in the accounting business, why aren’t employers paying more? Go Figure: If there’s really a talent shortage…

Business administration/management majors saw a solid increase of 6.7 percent to their average salary offer, raising it from $43,256 to $46,171, and economics majors saw a 6.9 percent increase to their average salary offer, which now stands at $51,062… despite the fact that accounting firms are among the most voracious recruiters on campus this year.

The new data comes from the National Association of Colleges and Employers, which goes on to add… Read more

Bookmark and Share

Posted on September 24, 2008
Filed Under BSG [CPA TRENDLINES] | 1 Comment

“Market Meltdown” Survey Results

Market MeltdownMARKET MELTDOWN: The CPA View on Financial Planning after the “The Panic of ’08″
Personal Financial Planning Issues and Opportunities
Preview Edition
FREE DOWNLOAD: Click here, 12 pages PDF.

In a new survey of CPAs taken in the days following the stock market meltdown Sept. 15, the vast majority of respondents expressed profound concern over the situation. But they also expressed cautious optimism based on prior moves they had made that anticipated a financial calamity.

Highlights:

FREE DOWNLOAD: Click here, 12 pages, PDF.

Bookmark and Share

Posted on September 23, 2008
Filed Under BSG ENTREPRENEUR, BSG [CPA TRENDLINES] | 3 Comments

keep looking »