The Wall Street Journal reports on how banks holding bum commercial real estate loans are hiding the truth:  

Banks call it a wise strategy. Skeptics call it "extend and pretend." ... the practice is creating uncertainties about the health of both the commercial-property market and some banks. The concern is that rampant modification of souring loans masks the true scope of the commercial property market weakness, as well as the damage ultimately in store for bank balance sheets.

Steve Forbes offers an impassioned call for banks to hide the truth about the values of securities they hold: 

An economic version of the bubonic plague is ready to reemerge: mark-to-market accounting. This rule was the principal reason that the financial disaster of 2007--09 threatened to destroy our financial system. 

Steve would like you to write your Congressman to make sure regulators don't force banks to come clean about what their investments are worth. Heads up, Steve -- transparency is good for markets, not bad for them.  We have a financial crisis precisely because banks were using misleading accounting both internally and externally to value their investments in a raft of mortgage-backed securities.  If they'd been telling the truth from the get-go, there would have been no shock when they finally got outed.  Remember that regulators mandated opaque bank accounting in Japan early in the 1990s, for the same reason that Forbes would like to see it in the U.S.  Didn't work out too well there, and won't work any better here.

 

The proposed reform of IAS 19 would make it compulsory for employers to recognise any gains or losses in their pension costs in their accounts immediately. This means that employers could be faced with having to post significant additional amounts. There will also be changes to how companies record the investment performance of pension scheme investments...this aspect of unintended consequences is the main danger in these proposals - while the IASB is keen to ensure that they are accounted for in the same way as other assets and liabilities under IFRS, pension schemes do have a special and unique character, most obviously they are long-term investment vehicles, whose liabilities do not fall to be met for many years to come. Pension schemes have a particular interest in seeking long-term investment growth - if they are incentivised to pursue more conservative strategies for accounting purposes, this may not be in the best long-term interests of their beneficiaries.

 

IFRS is far from inevitable in the US. Paul Beswick, Deputy Chief Accountant of the SEC, presented a good overview of the challenges in his remarks at the 29th Annual SEC and Financial Reporting Institute Conference, saying:

I believe that it is important to work on both questions of 'whether' and 'how' to incorporate IFRS at the same time because when the Commission is deciding whether to incorporate IFRS they should be in a position to articulate how any transition would occur...

First, we are going to consider how IFRS is utilized in different capital markets. While a number of publications indicate that over 100 countries have adopted IFRS, a question I believe that needs to be clarified is how have they adopted IFRS. In many cases the jurisdiction in question is making the evaluation of IFRS on a standard-by-standard basis and in some cases supplementing, clarifying, or minimizing the choices available under IFRS. This is an important distinction that is being made and one that I expect that the Commission will need to evaluate...

The second area on whether to incorporate focuses on the standard-setting process and the need for an independent standard-setting process for the benefit of investors. Here, we are going to focus on a couple of areas including, oversight and composition of the IFRS Foundation and its IASB, and the IASB's standard-setting process.

Must read for anyone seriously following accounting convergence in the US.