B en Neuhausen took the helm of the
Accounting Standards Executive Committee in 2005 and
led the all-volunteer AICPA committee through a
tumultuous time during which its responsibilities
shifted. On his watch as chairman, AcSEC transitioned
from a standard-setting body to a source of practical,
nonauthoritative guidance for CPAs and other financial
professionals. Neuhausen, a former Arthur
Andersen partner who is now a partner and the national
director of accounting for BDO Seidman LLP, has built
a reputation for accounting standards acumen. He
chaired the task force on real estate time-sharing
transactions and shepherded the resulting guidance,
SOP 04-2, to completion. SOP 98-1 on internal use
software, SOP 98-5 on startup costs and SOP 00-2 on
producers and distributors of films, issued during his
years on the committee, updated accounting for those
transactions to reflect significant changes. The
committee also issued a host of SOPs that kept
accounting for the insurance industry current.
Neuhausen will complete his service as chairman and
step down from AcSEC following the committee’s
September meeting. He spoke recently with the JofA
about the committee, accounting standards setting
and convergence to International Financial Reporting
Standards. What follow are excerpts from that
conversation.
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JofA:
What was it about AcSEC that kept you
involved and engaged for a decade?
Neuhausen: Well, when I
was first appointed, I’d say that what appealed to me
was the intellectual challenge of dealing with all
these accounting issues related to different
transactions, different industries and the constant
stimulation of understanding the issue and working
through them to the best solution. But I would
say now, looking back on my 10 years, what I have
really enjoyed most about the committee is the
people—the tremendous diversity of people on AcSEC,
its task forces and the AICPA staff and their
different backgrounds, interests and perspectives. All
AcSEC and task force members are volunteers. All of
them are committed to the process of trying to make
standard setting and private sector standard setting
work well and to come up with the best answers and
provide the best guidance to the profession. The AICPA
staff have great historical knowledge, and many of
them are leading experts in their areas.
JofA:
What are some of the most significant
accounting standards developed in the years
since you served as a FASB fellow in 1979–1981?
Neuhausen: There are
several I think about that are particularly
significant. There were two statements on accounting
for income taxes—96 and 109—that represented a major
change from the standards in place when I was an FASB
fellow. When I was a fellow in 1980, there was
no specific guidance on accounting for derivatives.
FASB issued Statement 80 in the middle of the 1980s
and then Statement 133 right toward the tail end of
the ’90s and then several amendments, interpretations
of 133 thereafter. So we now have a very comprehensive
body for accounting for derivatives. Finally,
I’d include Statements 87 and 106, dealing with
accounting for pension and post-retirement benefits.
Statement 87 was a significant change that made
pension accounting more transparent and more
understandable, and Statement 106 brought the
accounting for post-retirement benefits from the
obscurity of cash method to accrual accounting with
comprehensive disclosures.
JofA:
On balance, how would you say those
changes have affected the profession?
Neuhausen: Well, on
balance, I think it is a mix. I think there are pluses
and minuses. The new standards have been an
improvement but were not necessarily the best
standards we could have had. I think some of the FASB
statements, and Statements 109 and 133 in particular,
have raised the level of complexity of accounting
standards. I think FASB has gravitated toward very
highly technical and highly theoretical standards
that, in many cases, practitioners have found
counterintuitive and contrary to common sense. That
has made some of the recent standards much harder to
implement than they needed to be.
JofA:
What major changes in the standard-setting
process have happened since your FASB
fellowship?
Neuhausen: Well, I think
there have been two major changes in the process since
I was there. One was the creation of the Emerging
Issues Task Force, which was in 1984. There was no
body before that that was charged with dealing quickly
with emerging accounting issues. FASB was trying to do
it, but it was very hard for FASB to deal with
emerging issues along with the longer-term projects.
I think the EITF did fill that purpose, and it
was a significant change in the way we approached
accounting standards in the U.S. I think it has
limited proliferation of diverse practices. It has
kept accounting more consistent. I think the
other major change, which is a more recent one, has
been the concentration of all the standard setting at
FASB and bodies under direct FASB supervision. AcSEC,
as the representative of the AICPA, did set
authoritative standards at levels B and C in the GAAP
hierarchy. A couple of years ago FASB decided that
they didn’t want AcSEC issuing authoritative guidance
any more and that all the authoritative guidance would
come from FASB or groups controlled by FASB and that
AcSEC’s guidance would become nonauthoritative.
JofA:
What do you see as AcSEC’s role in
financial reporting in the future?
Neuhausen: I think
AcSEC’s most important role is to issue helpful
nonauthoritative guidance in two forms. One would be
the updates of the audit and accounting guides, and
the other would be the technical practice aids that
the AICPA staff develops with review by the AcSEC
planning subcommittee. AcSEC is involved right
now with updating about half a dozen of the audit and
accounting guides. The two we’re furthest along with
are airlines and casinos. The existing guides are more
than 20 years old, and those industries have changed
tremendously in that period of time. There are a lot
of questions about what authoritative guidance is on
point and how it should be applied. I think AcSEC is
going to make a major contribution to improving
practice in those industries and helping accountants
in those industries understand the requirements much
better than they’re understood today. Another
major role that AcSEC fulfills is to serve as the
voice of the AICPA in responding to proposals from the
FASB or, increasingly, from the IASB. AcSEC issues
comment letters on the exposure drafts giving our
views—on what we like versus what can be improved—in
the exposure drafts. We are in a sense the voice for
many in the U.S. profession who don’t have time to
send their own comment letters.
JofA:
What are your thoughts about requiring
U.S. entities to adopt IFRS instead of U.S.
GAAP?
Neuhausen: I have been
more a proponent of permitting rather than requiring
U.S. entities to follow International Financial
Reporting Standards at this time. I was involved in
the task force at the CAQ [Center for Audit Quality]
that prepared a first draft of response to the SEC
concept release. I was a proponent for permitting U.S.
entities to voluntarily adopt International Financial
Reporting Standards. I thought that would be a good
approach to seeing how smoothly the process worked. It
would be an evolutionary way to get U.S. accountants
up to speed on IFRS and would also offer an
opportunity to see how investors and other user groups
reacted to IFRS for U.S. companies. After a
period of voluntary adoption, we’d have some good
information to decide whether it makes sense to
require IFRS for all U.S. companies or for certain
kinds of U.S. companies. But the [momentum]
now does seem to be more in the direction of requiring
U.S. entities to adopt IFRS. I have mixed feelings
about requiring it. I think clearly in some respects
it’s a step forward to have U.S. companies using the
same accounting that everyone else in the world is
using. But I’m concerned about the implementation.
Depending on what the time frame is, do we have enough
accountants in the U.S. knowledgeable enough about
IFRS to have a smooth transition? I know that
part of the idea of requiring IFRS is that regulators
would think through all the steps and lay out a
timetable so that we could move in an orderly way. I
am concerned that the regulators may not think of
everything, that things may not go entirely according
to plan, and there may be some glitches. The voluntary
approach as a starting point would be more manageable
than a requirement at this time. I believe that a
market-driven approach of voluntary adoption of IFRS
would go more smoothly than a required “command and
control” adoption.
JofA:
You have always been a proponent of
work/life balance, even before it was in vogue.
How do you think work/life balance efforts have
succeeded in the accounting profession, and what
does the future hold?
Neuhausen: It is true
that I did try to balance my personal life with my
professional life once I got married in 1987. I mainly
credit my wife for that, for saying, “You need to get
your priorities straight. Your wife and your kids
count here, and they need you, too.” I tried to manage
the hours in the office. I really made an effort to do
that, and I found that, for the most part, if I made
an effort to do it, I was usually successful.
I get the sense that when [work/life balance
initiatives] were first rolled out, a lot of people
were kind of nervous about them. If I take advantage
of this program, is it going to retard my career? Am I
going to be looked at unfavorably? My sense is
that the leadership of the firms have been behind
these programs—have been sincere about them—and as a
result people have seen that trying to achieve better
balance between their professional and personal lives
does not harm their career advancement. Therefore,
more and more people are focused on balancing their
personal and professional lives, and it is shifting
the way the profession works.
JofA:
Late last year you were diagnosed with
metastatic pancreatic cancer. How has dealing
with cancer affected your career and your AcSEC
chairmanship?
Neuhausen: The first
couple of months after I started chemotherapy were
pretty difficult. The treatments really knocked my
energy level down, and I had fevers and other
complications and numerous doctors’ appointments. Even
on days without appointments, I often didn’t feel
strong enough to commute into the office. There were
two AcSEC meetings that I couldn’t attend in person.
My colleagues at BDO Seidman could not have been
more supportive, with numerous messages of
encouragement, time off whenever I needed it and
flexibility to work from home. Similarly, my
colleagues on AcSEC and the AICPA staff were
wonderfully supportive and pitched in for those two
meetings by divvying up the responsibility to lead
AcSEC’s discussion of each agenda item. It was like
having half a dozen volunteer assistant chairmen at
those meetings to keep the projects moving. My former
colleagues from Arthur Andersen and numerous other
accountants I have worked with over the years also
provided incredible encouragement. I have really been
overwhelmed by how many accountants have gone out of
their way to send their good wishes in phone calls,
cards, letters and e-mails to boost my spirits.
As of June, I had received more than 500 messages
of support and encouragement on my personal Web page
at www.carepages.com
—the vast majority from members of the profession.
That response is a real tribute to the caliber of
people in the profession and a commentary on how
supportive and close-knit the profession is. This
recent experience is my second chance to see what a
terrific profession we have. I lost my wife to breast
cancer six years ago. Then, too, other accountants
were wonderfully supportive with condolence calls and
letters and generous donations in memory of my wife.
After working through the initial complications,
my chemotherapy has become more manageable. I have
been able to resume most of my job responsibilities
and resume attending AcSEC meetings in person. While I
am feeling good, it is likely that tougher days lie
ahead. Pancreatic cancer is one of the most aggressive
cancers, and the long-term survival rates are not
good. For now, I savor every day and am grateful for
the strength to fill my roles as parent and as
partner. If and when my condition worsens, I feel
confident that I’ll continue to receive incredible
support from my firm and the entire profession.
Bonus Interview Question
JofA:
Do you think that the U.S. should
continue to have a national standard setter
even if we move to IFRS?
Neuhausen: I think
that’s something that we would need to assess as
we move along. For a number of reasons, U.S. GAAP
is more prescriptive than IFRS. Under GAAP, we
have a lot more guidance; we have fewer choices,
fewer alternatives. There are a number of reasons
for that including the way the SEC regulates the
reporting of registrants and the U.S. legal
system, and those environmental factors aren’t
going to change overnight. So we may find that
even if the U.S. switches to IFRS, we will need
more detailed guidance and more industry guidance
than other countries do. A U.S. national standard
setter could fill in the additional industry
guidance, identify which of multiple alternatives
are and are not acceptable interpretations for
U.S. purposes, etc. I guess the other
[question] is would everyone in the U.S. be
switching to IFRS? Any SEC initiative would only
affect public companies. There’s really no central
body that tells private companies what reporting
to follow. Many private companies might choose to
switch to IFRS, but others might prefer to stay
with the familiar U.S. GAAP. In that case we would
still need a standard-setting body to deal with
U.S. GAAP for private companies that are still on
that basis. There’s also a question of
AcSEC’s role if the U.S. moved to IFRS. As I
mentioned, IFRS is a more judgmental framework
than U.S. GAAP, with less guidance and more
choices and alternatives. Under such a framework,
there would be a continued, perhaps even an
increased, need for the nonauthoritative guidance
that AcSEC now delivers.
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