Agency keeps watch on accounting standards

BY ALEXANDER SOULE
Hearst Connecticut Media

A letter arrived from a Westchester County number cruncher, early into a Financial Accounting Standards Board review of whether to move leases onto the expense column of business ledgers, who politely opined there is no “right” answer to the question given the competing interests.

Does your stereotypical, mild-mannered accountant get a bit more animated at times in engaging with the organization tasked with maintaining Generally Accepted Accounting Principles, or GAAP?

“They do,” said Terri Polley, president and CEO of the Financial Accounting Foundation.

Polley’s FAF oversees the Financial Accounting Standards Board, which is charged with updating and reviewing the accounting standards used by larger companies. The foundation also is the parent organization for the Government Accounting Standards Board, which sets the rules used by states and municipalities.

Polley has been CEO since 2010. The first five men to chair the FASB are among the 90-plus inductees of an Accounting Hall of Fame maintained by Ohio State University, including Greenwich resident Donald Kirk.

“The 1960s ”“ referred to as the go-go years ”“ had resulted in the stretching of the boundaries of good accrual accounting almost beyond recognition at times,” Kirk said, speaking at a 2013 roundtable in New York recounting the organization’s first 40 years. “We all recognized that we had quite an undertaking.”

If FASB and GASB are acronyms people seldom stumble across in their everyday lives, they touch many aspects of those lives. Decisions made by the GASB can impact government budgets and so by extension the taxes people pay, while corporations can undertake significant strategic shifts based on FASB deliberations, with a potential impact on their workforces.

Polley has spent the large part of her own career ”“ 27 years and counting ”“ with the accounting foundation, rising through the FASB side of the house, initially with the Emerging Issues Task Force that tackles the toughest questions confronting the industry.

She joined the FAF from the Stamford office of Arthur Andersen, where a demanding travel schedule prompted her to examine her options after having a baby. She interviewed with the FASB while holding out hope for another job that was her top choice. As it turned out, that company made its offer the day she had already accepted the FASB’s offer.

“I said to myself, ‘OK, most people only stay at the FASB for a few years and then move on,'” Polley said. “‘They come, work on a project, become an expert and then go out into the field. So I’ll do that,’ and 27 years later I’m still here.”

Over the years, she has seen some pitched battles. To say FASB deliberations can spark animated discussion would be understating things. The Emerging Issues Task Force’s first chairman, Jim Leisenring, recalled receiving hate mail and a California “Rally in the Valley” during the FASB’s initial attempt to implement new rules for companies’ expense stock options, speaking at a 2013 roundtable discussion in New York.

Opposition can come from far more daunting quarters ”“ panel members recalled direct confrontations with executives as powerful as General Electric’s Jack Welch and General Motors’ Roger Smith.

“Jack Welch was talking to me about all the reasons that the FASB should back away from accounting for stock options,” said former FASB Chairman Robert Herz, speaking alongside Kirk at the 2013 roundtable discussion.

“I was patiently giving him the board’s reasoning, and he was getting more and more frustrated, at which he finally yelled up to the pilot and asked if he could open up the door and throw me out at 30,000 feet.”

Polley can apply some perspective to the rigors of the job ”“ she grew up northeast of Philadelphia in Yardley, Pa., her father coming to the United States after World War II and spending much of his youth alongside his parents in forced labor and then a camp in Germany for displaced people.

“He was 17 years old ”“ he had 50 bucks in his pocket and made a life for himself,” Polley said. “That’s where I think my work ethic and commitment come from.”

Hearst Connecticut Media includes four daily newspapers: Connecticut Post, Greenwich Time, The Advocate (Stamford) and The News Times (Danbury). See stamfordadvocate.com for more from this reporter.