For the good of investors, FASB should withdraw its loss contingencies disclosure draft

I have long suspected that “protecting” America’s financial statement users from “bad” financial statements is a futile task.  The FASB’s efforts at revamping its Statement 5, on loss contingencies, confirms the suspicion.  It’s not that we have too many bad financial statements.  It’s that the users — including some who hold advanced business degrees and certifications — lack common sense.  Common sense may also be in short supply at the FASB. Continue reading

FASB: SocGen’s Kerviel accounting was right?

Société Générale has been treated to all kinds of abuse for recognizing in 2007 Jerome-Kerviel losses “incurred” in 2008 just after the 2007 year-end cutoff. Floyd Norris has been especially critical of the French bank’s use of the “true and fair view” exception which he calls an IFRS “loophole.”

Well, as they say, what goes around comes around. In the Alice-in-Wonderland world of financial reporting standards setting the current U.S. financial accounting standards-setter (the FASB) is on the verge of effectively ratifying SocGen’s 2007 treatment of those Kerviel losses. This ratification comes in the form of an Exposure Draft — for lay readers, an “ED” is a draft of a new accounting standard — on the Disclosure of Certain Losses and Contingencies. More on that below. Continue reading