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December 10, 2007


George Weinbaum

I don't cut Arthur Andersen any slack. I don't care what supposed "side agreements" were kept from AA. AA didn't do the job. It's that simple. I agree with you and oppose US adoption of International Accounting Rules.

John Coffee

A very interesting piece. I had not focused on that application of my thesis and you make your point well. I do not want to abandon the hope for common accounting principles and the best answer may be to place more responsibility on the auditors in the U.S. You might be interested in the fuller statement of my views in a later book: Coffee, GATEKEEPERS: The Professions and Corporate Governance (OUP 2006).

David Albrecht

Very interesting position you take. Your reasons seems sound and sophisticated (not sophist at all).

I have never bought into the idea that the US needs principles based GAAP. Rather, given the long history of business fraud and lax auditing over the decades, it never seemed to me that there would be any benefit to investors.

Principles based accounting makes income smoothing easier to accomplish, and what is accounting fraud but aggressive income smoothing?

Actually, classic arguments favoring principles based accounting can best be understood in the context of management attempting to smooth income so that the true or intrinsic performance of the company is being reported. Why deal with the vagaries of rules when subtle and necessary adjustments by managers are all that are needed to better report the performance of the company?

Your argument against adoption of IFRS is important at this time, when so few are standing up in opposition to the wave of IFRS.

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