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Corporate cleanup work not done yet

By Tony Kindelspire
The Daily Times-Call

FORT COLLINS — You might think that after Enron, WorldCom, Tyco and the rest of the corporate hooligans that backroom wheeling and dealing by large corporations would have come to a halt — or at least slowed down a little bit. One who is on the inside says you would be wrong, however.

“We get lobbied by just about everything,” said Robert Herz, who took over as chairman of the Financial Accounting Standards Board last July.

While the Securities and Exchange Commission is the

government entity charged with writing the laws regarding financial accounting and reporting standards, it is the FASB — made up of people from the private sector — that is charged with deciding what those standards will be.

Recently, Herz recalled, he was approached by “steel interests” who were complaining that onerous accounting requirements were keeping the industry from being cost-competitive.

The lobbyists wanted the rules to exempt companies in that industry from being required to show the cost of their pensions on their balance sheet.

“Of course, those costs don’t go away just because you don’t have to report them,” Herz noted. “And how could you do that for one industry and not another?”

Another time, Herz said, he was approached by a company that asked if there would be a way it could avoid reporting wages it paid its workers.

Was that accountant humor, or was he serious? We’re not sure, but Herz does seem like a man who has his hands full with his job.

Herz spoke this week at Colorado State University at the invitation of his longtime friend, Lynn Turner, a former chief accountant for the SEC who now runs the CSU College of Business’ Center for Quality Financial Reporting.

Turner said he believes Herz, who had been PricewaterhouseCoopers’ North American leader before taking the FASB job last year, will take a leading role in improving the quality of financial reporting. It was, after all, the lack of sound reporting that helped lead to the downfall of some of the country’s biggest companies and the loss of billions of investor dollars in the past year-and-a-half.

“In recent years, Congress has become much more active in urging FASB to acquiesce to the desires of special interests rather than the needs of investors,” Turner said. “The special interests got what they wanted and in the end, the investors just got it.”

Speaking in front of about 100 students, faculty and guests, Herz told the audience that he felt neutrality should be his board’s top priority.

“Information not biased or trying to influence behavior one way or the other,” he said. “People have been kind of forgetting that principle.”

Herz stressed that it was the SEC’s job, not FASB’s, to discipline those who break the rules. But it is FASB’s job to help set those rules, and that’s something he takes seriously.

At the same time, Herz said, he understands the “political reality” that comes into play. His big wish, he said, is that the SEC would listen to FASB as much as it listens to lobbyists who try to bend the rules their way.

“I think the SEC should be trying to use us because we are the experts in standard-setting,” Herz said. “Historically, the involvement has come mainly from the supply side — the auditors and the companies. It’s good input, but it’s input from their side.”

Tony Kindelspire can be reached at 303-776-2244, Ext. 291, or by e-mail at tkindelspire@times-call.com.