In a late pre-retirement hurrah, outgoing International Accounting Standards Board chairman David Tweedie has made a bequest to his successor: last week’s agreement with Leslie Seidman, his opposite number at the Financial Accounting Standards Board, to extend by “an additional few months” the already elastic June 1 date for completion of the decade-long aspiration to converge international and American accounting standards (transcript here or here).
Is there a sentient being on the planet who is so benighted as to claim surprise?
Long predicted (here), the continued slippage in this always-distinct possibility – hardly deserving to be credibly described as a “target,” much less a “deadline” – continues to recede into the distant future.
Which was inevitable, for two reasons, purely aside from the dubious substantive merits (no better addressed than by Tom Selling’s acerbic Accounting Onion).
First is that the still-unfinished workload of four pending priority projects – the individually challenging topics of leasing, revenue recognition, financial instruments and insurance – had long been recognized as impossible of accomplishment within the resources of the two bodies and the politicized obligations to their antagonistic constituents (here). And that’s even if there had been agreement between the bodies themselves, which on these highly-complex subjects, there is not.
Second and more fundamentally, the tediously-reported proclamation of real convergence commitment has never been more than a smokescreen behind which the divergent interests of the Americans and the Europeans have knocked heads to the point of insensibility. (For which, recall the continued fudging of the SEC as to whether, if ever, that agency is even going to confirm a date certain on which to decide if to weigh in or not (e.g., here and here).)
Why no-one has called the question on this endless charade reflects the two-level fantasy in the dialog: the IASB and the FASB both pretend to believe in the desirability of fully-converged accounting standards, and the community of financial statement issuers and users pretend to believe them.
At the same time, the complexity of standards within either IFRS or US GAAP expands apace. The example is the latest annual report from HSBC, which achieves a stunning 392 pages (here), thereby vying in both bulk and opacity with such legislative monstrosities as the Dodd-Frank law or the EU rules defining chocolate.
There is a striking and pertinent observation, in academic studies of breakdowns and failures in large-scale strategies: once a project starts to go over time and budget, each of the successive series of further delays and over-runs is typically longer and more costly than the last.
Public works projects are notorious: the Sydney opera house was completed in 1973 for A$ 102 million, nine years late and 15 times over its initial A$ 7 million budget. Finally completed four years late in 2003 for $ 14.6 billion, Boston’s “big dig” harbor highway tunnel tripled its initial estimate. The Eurotunnel was a happy contrast, only one year late in 1994 and a mere $ 3.6 billion over budget.
Military and political conflicts are equally instructive. President Bush’s May 1, 2003 speech under the “Mission Accomplished” banner, two months into the conflict in Iraq, is now at eight years and counting. The continuing escalations of American commitment in Vietnam for a victory supposedly just around the corner still have tragic resonance. The broken promises of peace in the land of Abraham’s children date not just to the founding of Israel in 1948 but at least back to the Balfour Declaration of 1917.
In Joseph Heller’s darkly comic 1961 war novel “Catch-22” – still the best manual in print on the absurdities of dysfunctional organizational management (see my January 2004 review in the International Herald Tribune) – the sycophantic lieutenant Scheisskopf secured his reputation and his promotion by the strategy of announcing that the much-despised weekend parades would not be held.
(Anyone missing the scornful locker-room epithet is invited here for his name’s translation from the German.)
Tweedie and Seidman having picked their low-hanging fruit, they now confront the reality of a tree too tall to climb. So the virtue of their other modest accomplishments being acknowledged, their adoption of the Scheisskopf technique of perpetual postponements invites skepticism and ridicule in kind.
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