"The crisis has highlighted importance of implementing and enforcing high quality and consistent accounting standards around the world. The SEC has of course played a leadership role in fostering this ideal and I remain committed to the goal of a global set of high-quality accounting standards. I also believe that there are issues that will be critical to address as we at the SEC consider the input we have received on last year’s proposed roadmap on the role of international standards in the U.S. It is with the principles and ideas I just outlined in mind that I am committed to focusing our efforts this fall to following up with a work plan that expands upon the concepts proposed in the roadmap."

If the remarks of Fed Governor Elizabeth A. Duke are any indication, the answer is a flat "No."

At the outset of her remarks at Monday's AICPA banks and savings institutions conference, she gave the traditional disclaimer that her comments reflected her views and do not necessarily reflect those of the Board of Governors or staff. Let's hope they don't.

In response to the financial crisis, the IASB has speed-balled a proposal to rejigger the accounting for financial instruments. Issued in July, with the comment period ending yesterday, the proposed accounting would give investors a new prism through they can view financial statements.

Only two kinds of accounting would exist for financial instruments: amortized cost or fair value. But they can't look at the same financial instruments both ways - a batch of financial instruments would be classed one way or the other. You wouldn't see financial instruments reported at amortized cost, with a fair value for thesame holding reported at fair value.

I doubt if there have been any more eagerly anticipated earnings in the last ten years than those of the big banks ever since they started their self-destruct process a couple years ago.

First, everyone sweated over the loan loss allowances as housing and asset-backed securities slumped; then when firms had to start reporting the kind of fair value estimates employed - the Level 1, 2 and 3 hierarchy - everyone anticipated which bucket would be fullest. Now, the most hotly-anticipated bank figure is tangible common equity, in whatever form you decide to define it. It's kind of like pro forma earnings has always been, only maybe this is a pro forma lifeline measurement.

Finally, the FASB held its long-anticipated meeting on the two FSPs that would have gutted fair value reporting as it exists. There's been more hoopla (and hope-la) about these two amendments than in all of March Madness.

Briefly, here's what transpired, as best as I could tell from the webcast of the meeting:

On Wednesday, acting Chief Accountant Jim Kroeker testified before the House Committee on Financial Services with regard to the progress being made by the FASB on "fixing" mark-to-market accounting. Some of the points he made are troubling in that they illustrate just how far - and how fast - the political interference in independent standard setting has gone. For example:

"... the FASB has acted diligently and responsively to use their expertise as an independent standard-setter and expose amendments to the measurement of securities in inactive markets and the recognition of "other-than-temporary" security impairments. Following the FASB due process procedures, the proposed amendments were deliberated fully at an open public meeting of the full Board, were approved by a majority vote, and are now subject to public comment."

After weeks of handing over the microphone to anyone who wants to bash mark-to-market accounting on its op-ed page, the Wall Street Journal decides a little equal time is in order. They handed over the mike to Mr. James Chanos, who provided an excellent analysis of the problems facing investors and the FASB at this pivotal moment in its history. From the editorial:

"The FASB and Securities and Exchange Commission (SEC) must stand firm in their respective efforts to ensure that investors get a true sense of the losses facing banks and investment firms. To be sure, we should work to make MTM accounting more precise, following, for example, the counsel of the President's Working Group on Financial Markets and the SEC's December 2008 recommendations for achieving greater clarity in valuation approaches.

On Tuesday the FASB released two exposure drafts that tinker with the edges of fair value reporting. While the Board had planned several fair value improvements projects that encompassed one of them (guidance on determining whether a market for a security is active), the timing of these two projects is in direct response to the Congressional pressure brought to bear on the FASB last week when Congressman Kanjorski held an investigative hearing into mark-to-market accounting.

Talk about misplaced investigations: what needs to be investigated is why Congress listens so well to bankers and their lobby. Consider the bill sponsored by Representative Ed Perlmutter of Colorado - the "Federal Accounting Oversight Board Act of 2009." It fairly bristles with the kind of rewards the banking industry would love: better than bonuses, it could give them the kind of regulation they want. The bill would transfer the SEC's oversight of the FASB to the new "Federal Accounting Oversight Board." Look at its mission - it's a banker's dream come true:

Someone's got to take the fall the market's falling out of bed and the economic turmoil. No managers of financial institutions have been brave enough to step forward and acknowledge that it was their fault. No regulators have been bold enough to say, well, they weren't bold enough as regulators.

It's been a while since I blogged anything - many projects for the day job keep me away from it. Before February slides into the past however, I'd like to share with you a "Tale of Two Cows." It's a fable about suspending mark-to-market accounting... from "Clusterstock," a site I'd never heard of before someone sent me the link.

I will not touch the name of that site.

No trick, maybe all treat for financially distressed homeowners. On Halloween, news spread that JP Morgan Chase (JPM) would work with homeowners holding about $70 billion of mortgages. While JP Morgan Chase didn't step into the subprime swamp when it was percolating, it inherited a large number of subprime loans from its acquisition of Washington Mutual (WM) - who wasn't shy at all about making bad loans.

Terrific idea - keep the loans whole, build customer loyalty, keep people in their houses and just maybe, help stabilize the real estate market. In short, do what you can to keep the economy going.

Last Thursday, SEC Chairman Christopher Cox took his turn on the hot seat before the Committee on Oversight and Government Reform United States House of Representatives. His testimony offered some interesting hints about where the SEC might be going - though they're a bit conflicted.

Cox argued that the SEC's strengths - a mandate for investor protection, rather than a supervisory role for institutions - made it the right regulator for the times. As he said, "if the SEC did not exist, Congress would have to create it." And he defended the SEC's turf against encroachment by others:

Take a Chevy Tahoe, add bling, call it a Cadillac Escalade - and GM improves its survival odds if it sells more Escalades than Tahoes.

It's a trick we've all seen for years: take your basic model, extend it a bit here and there, make options standard and presto! You've got a more exciting version of the same thing that you can sell for a better price. It's not always a winning strategy: Chrysler had an amusing turn with its "Plodges." And for crying out loud, Taco Bell has been using it for years. A Chalupa is a Gordita is a Crunchwrap.

Much political hay will be made this week over the proposed bailout bill. Could anyone have scripted a more bizarre scenario only a month and a half away from the national election?

While the candidates duke it, figuring which way a position will garner them more votes from the other or get those undecided voters to decide in their favor, there will be another fight going on: the battle to dump fair value accounting. There are rumors of legislative action that calls for a moratorium on Statement 157.

On Wednesday, the FASB will take another look at the effective date to be inserted into the exposure draft of the forthcoming amendments to Statement 140 and Interpretation 46R. These amendments, covered before in the May Accounting Observer and in subsequent posts, will make full consolidation of the vehicles used in securitizations much more likely.

In other words, after these amendments go into effect, firms might still securitize loans - but the loans will still exist on their balance sheets and a liability shown for the amount of the "pass-through" security created in the securitization. The traditional "sale treatment," where the assets are derecognized and the pass-through liability instrument isn't shown on the securitizer's balance sheet, would likely be a much rarer find.

Saturday's New York Times featured a front-page piece by reporter Stephen Labaton on the forthcoming timetable to be set by the SEC for American companies to use IFRS - and mutual recognition of the enforcement agencies regulating foreign brokers, enabling foreign brokers to sell directly to Americans. 

The S.E.C. also plans to announce details of a pilot program that would enable foreign brokers to deal directly with American investors, while continuing to be largely regulated by the foreign country. The first country in the program will be Australia, although officials hope to eventually include other countries.

Last week's Barron's contained a good story by Andrew Bary on gains being recognized by investment banks on their marked-down debt. I've been a bit surprised by the number of people who've asked about this in the following week: it's not new news. I wrote dedicated reports about it last March, again in June, and once more in November.

It's not as scary as it sounds - Bary's piece was sharp and insightful, and shows that there's a skeptical audience out there when it comes to including such gains in the earnings stream that investors should capitalize. He quoted some other knowledgeable folks who believe this kind of earnings element should not be capitalized by investors.

If I haven't mentioned it lately, I'll say it again: Statement 157 is nothing new under the sun. While those who would like to blame accounting for their mistakes (and that's what it does: the accounting shows their mistakes) continue to bleat about the unfairness of fair value reporting, the fact remains that Statement 157 had nothing to do with changing the measurement of fair values. It changed the disclosures: now we can look at reported values and know how much they were the results of quoted markets or black magic. It was always that way - it's just that until Statement 157, we never had a good idea of the prevalence of black magic in financial reporting.

With all the misguided bashing of Statement 157 going on , it's hard to remember that it hasn't even become effective yet . Not until this quarter.

Last month the SEC put in its two cents. The Division of Corporation Finance released a letter it had sent earlier in the month to unspecified financial institutions regarding their pending application of Statement 157. The letter is not an amendment of Statement 157; it's an amplification of Statement 157. The FASB cannot tell companies what to include in the "Management's Discussion & Analysis" section of SEC filings: that's the SEC's turf. Therefore, Statement 157 didn't include any mention of what kinds of disclosures to make in the MD&A. That will be particularly of interest to investors when firms have to use "unobservable inputs" (Level 3) to estimate the fair values of assets. This letter fills that guidance void:

I believe we'll soon be hearing about the SEC's plans for allowing companies to use International Financial Reporting Standards here in the United States. The Public Company Accounting Oversight Board, a sort of subsidiary of the SEC that provides oversight of the accounting firms that audit publicly-traded companies, issued its strategic plan on March 31. Some of the goals listed in the document indicate how seriously the PCAOB is taking the pending convergence of US and international accounting regimes. Mentioned as a development that may impact the PCAOB's programs and operations:

One doubts that this would be at the top of the PCAOB's list of possible developments that could impact its operations if it wasn't likely to become a reality. Also, the PCAOB expects to inspect 72 non-US registered accounting firms in 2008. That number is projected to grow 40% in 2009 to 101.