What I’d Like to Tell Ed Perlmutter

Congressman Ed Perlmutter represents Colorado’s 7th district, which is not my district, but close enough.  He’s a member of the House Finance Committee and was quite visible during the MTM hearings.  Personally, I thought he was guilty of a little grandstanding during the mtm hearings (I wouldn’t tell him that), but overall I think he’s smart and genuine, and a good public servant who’s serious about governing.  He’s “in it for the right reasons,” as they say.  (For sure, I’d tell him that).

So he’s really interested and will play a key role in the regulatory reform legislation.  Among other things, the proposal laid out for the president calls for  

the accounting standard setters make substantial progress by the end of 2009 toward development of a single set of high quality global accounting standards.

Here’s what I’d like to say to Congressman Perlmutter

Be careful what you wish for, Congressman.  Take a look at the transcript of the mtm hearing and you’ll see Bob Hertz make a comment about amending or replacing mtm, and he says that he wants to make sure that any changes are consistent with IFRS and to get a new international standard approved would take at least a year.

Congress likes having the ability to drive quick changes to the accounting standards.  We’ve seen it happen to share-based compensation, off-balance sheet financing in the wake of Enron, and the latest, mark-to-market. Right now, the international accounting standards setting infrastructure will not accommodate that.  It can’t even come close.  Take a look to see how long it took to get Basel II–that’s what we’re talking about here.

I’d argue that the accounting standards setting infrastructure has difficulty keeping up with the increasingly fast-paced business world, where new transactions are being concocted everyday.  Throw international politics on top of it, and the disparity between the speed of business and the speed of standards setting grows even wider.

I’d say, “Congressman, please don’t focus solely on creating a single set of international standards.  Perhaps more importantly, someone needs to focus on creating a standards setting infrastructure that is capable of keeping those standards relevant as the nature of business changes going forward.”

Is anyone else talking about this?

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