Questions for Al Rosen, FCMA.
A: Many nations are re-regulating or tightening up requirements as a result of the 2007-2010 world financial meltdown, caused in significant part by de-regulation. In adopting IFRS, Canada is doing the opposite. IFRS gives unchecked power to executives to report their viewpoint, he it reasonable or wildly optimistic. Often, yet-to-be bargained (unrealized) transactions are reported based on executives' hopes, instead of enforceable contracts. IFRS is founded on a false concept that all "executives know their company best," and will report fully and honestly.
Q: What should a Canadian CEO of a publicly traded corporation know about the consequences of the pending IFRS standards?
A: IFRS has all the inherent ingredients to carry out a massive Ponzi. People can easily be given back their own money and have it called "income" or "yield." Clear separations of investors' capital from earned income are few in IFRS. A CEO requiring new debt or equity has to be concerned that a competitor will use IFRS to extensively create fake revenue and income. Burned Canadian investors could again walk away from financial markets, as they did in the 1950s and 1960s. IFRS was designed in Europe in a rush, using a "lowest common denominator" approach to satisfy all European countries. In significant respects, IFRS is not suitable for Canadian industries, laws and customs. CEOs should seriously consider adopting U.S. accounting and reporting standards to avoid being designated as a potential manipulator.
Q: Why, in your opinion, is Canada so lax in its accounting standards, particularly in the area of forensic accounting?
A: Sadly, many Canadians have not comprehended the causes of Canadian corporate financial collapses. Large numbers could have been caught at an early stage if Canada had had independent, motivated investor protection agencies. Instead, much of Canadian law is heavily-biased on protecting business executives and auditors instead of investors. If Canada had had an investor protection agency in place, IFRS would never have been adopted. Its undefined "principles," deregulation and vague requirements are definitely substandard.
Q: What comment might you make about the "cost" of regulating IFRS?
A: Canadian courts typically demand specific identification of departures from concrete rules or laws in order to declare negligence or fraud. Otherwise, the financial tricksters walk away with your money. IFRS will be exceedingly difficult to monitor/police because extensive alternatives exist. Contrary to promoters' exaggerated claims, comparisons from company to company can become close to impossible to make; acceptable alternative choices obviously prevent comparisons.
Q: In light of IFRS, what career advice would you give a Canadian student entering the CMA program?
A: Deregulation has been a repeated failure for Canadian savers; decade after decade has produced a new batch of financial collapses, often caused by some form of "cooking the books." Prospective CMAs have no choice, but to deeply analyze Canadian and U.S. rules, identifying where they are weak. Memorization of rules is career-limiting. The very fact that IFRS was brought into Canada shows that the country is desperately short of analytical accountants.
Al Rosen, FCMA, is the principal of Rosen & Associates; a litigation and investigative accounting firm. He recently co-authored the book Swindlers with his son Mark Rosen.
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|Publication:||CMA Magazine (Mississauga)|
|Date:||Mar 1, 2011|
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