Conversation with Dennis Beresford

Joe: I am delighted today to be talking with Dennis Beresford, one of the most influential accountants in the history of the profession. Just as importantly from the perspective of this blog, he has also spent quite a number of years as a teacher.

Denny, I recently read one student review of your class that said: "Excellent in stimulating student's interest in accounting matters. Very intelligent and dynamic. Good class to take for improving research, critical thinking, and communication skills."

You have certainly had a wonderfully wide and varied career. Can you furnish us with a short biography of some of your many accomplishments over the years?

Denny:   The short biography is 26 years in public accounting with what is now Ernst & Young, 10 ½ years as Chairman of the FASB, and 16 years as E&Y Executive Professor of Accounting at the University of Georgia.

I began as a staff auditor in the Los Angeles office of E&Y and worked there for about 10 years. I then spent the next 16 years in the National Accounting & Auditing Department, coming to focus mainly on financial accounting matters. During that time I served on the AICPA’s Accounting Standards Executive Committee for 6 years, including 3 as Chairman, on the Financial Accounting Standards Advisory Council (advisers to FASB) for 4 years, on the International Accounting Standards Committee for 2 years, and was one of the original members of the FASB Emerging Issues Task Force.

During my time at the FASB we dealt with any number of challenging issues, but the most controversial was accounting for stock options. In that case, Congress proposed legislation that would have effectively put the FASB out of business. We decided to make a strategic retreat and issued a final standard that required new disclosures and not new accounting. But the Board did not back down on many other demanding issues such as post-employment benefits, income taxes, and marketable securities. Perhaps the greatest achievement during my time at the Board was the beginning of the FASB’s international activities, which have now resulted in many of the most important topics being developed as “convergence” projects with the IASB.

Beyond my academic career, I have enjoyed the opportunity to serve at the same time on a number of major corporate boards. Most notably, I became a director of WorldCom and its audit committee chairman in time to help lead the special investigation of what was the world’s largest financial reporting fraud and subsequent restatement. At the same time the company was going through the world’s largest corporate bankruptcy reorganization. Shortly after that was finished and WorldCom was sold, I joined the board and became audit committee chairman of Fannie Mae, which had its own major financial reporting fiasco. I oversaw the restatement of that company’s financials over the next year and a half and was asked by the federal government to stay as a director when the company was put into conservatorship as a result of the Great Recession. These corporate governance experiences were among the most interesting, challenging, and rewarding of my entire career.

Joe:   You have certainly worked with some well-known organizations as they have gone through critical times.   As we all know, college education is under attack at present for many reasons including a perceived failure to develop critical thinking skills and, of course, the escalating cost and mounting student debt load.   You have been at the University of Georgia for nearly two decades so you have seen much of college education from the inside—up close and personal.

This is certainly not the same type of situation as WorldCom or Fannie Mae.   But it is a legitimate crisis.  I am extremely curious.   If you were hired as a consultant to advise the hierarchy of college education, what would be the first one or two pieces of advice that you would give?

Denny:  Keep in mind that my role at WorldCom and Fannie Mae was primarily to help with the accounting. So that doesn’t necessarily make me a “big picture” expert. With that stipulation, what I’d primarily suggest is devoting more resources to actual education – student instruction – and less to research and administration. In at least the major research universities such as where I’ve been for sixteen years, tenured and tenure track faculty often teach four or fewer classes a year. Similar to business practice, there should be more of a cost/benefit test applied to the research for which those faculty members are freed up – is it really worthwhile? If not, those resources should be redirected to the classroom. Further, administration headcount seems to be growing at a faster rate than faculty at many schools and in the business world this relationship between “direct and indirect labor” would probably be challenged more quickly.

Probably the second piece of advice would be for colleges and universities to engage even more directly with the business community. After all, a college is a business, albeit a not-for-profit one. Thus, ideas and assistance can be gained from many in the business community and grads, local companies, and many others are almost always willing to help. Unfortunately, there is still a very cynical attitude toward business on many campuses and many professors and even students are wary about corporate motives. The reality, of course, is that businesses do much to help already, but engaging further could help break down some of these communication barriers and lead to an even more productive partnership.

Joe: What courses did you teach during your time at the University of Georgia? Most teachers that I have met have days in class that seem to go just perfectly. There are never enough of those days but there are some. However, those days help us understand what the class environment is supposed to look and feel like. Can you describe what a perfect classroom day felt like when you were teaching? I am interested in getting a vision of your style of teaching.

Denny:   I was fortunate to be able to limit my teaching to two classes: the financial accounting class for MBA students and “Accounting Policy & Research” for MAcc students. I taught the former for full-time, on-line, and executive MBA classes and for the latter two categories I developed the materials the first time the classes were taught at Georgia. I tried to fill those basic accounting classes with lots of practical experiences from the business world so that students could see how accounting is used to make decisions that will determine the success or failure of an enterprise.

While I enjoyed those MBA classes, I felt the MAcc classes were where I could really contribute more. The objective of the Policy class was to have the students develop an understanding of how the specific rules on leases, etc. that they learned in undergrad classes were applied in real world situations. For example, the students had to research and prepare case reports on such matters as the accounting for LeBron James’ first shoe endorsement contract with Nike. But the most important part of the class was the nearly daily assigned readings and directed discussions on many of the accounting theory issues that had challenged the FASB, SEC and others over the years and were continuing to do so.

I would begin by introducing one of the discussion questions I had developed based on the assigned readings and ask for a volunteer to give his/her opinion. To be clear, students understood this part of the class was designed to help develop their critical thinking skills and to make them less nervous about offering an opinion on a technical matter. And they knew that participation was an important part of their grade! On a perfect day, a high percentage of the class would eagerly volunteer and I would only have to call on a few students to ensure near 100% participation. Some of them would get frustrated because they’d say, “But we just want to know what you think!” I’d add a bit of my wisdom along the way but I always felt that my main responsibility was to have the students do their own thinking.

Joe:   It sounds like you and I teach in much the same manner.   Students always like for us to give them answers but I’d prefer for them to figure the answers out for themselves.  

Okay, I have one final question.   Earlier in this conversation, you mentioned that you felt that the greatest achievement during your time at the Board “was the beginning of the FASB’s international activities, which have now resulted in many of the most important topics being developed as ‘convergence’ projects with the IASB.”

Over the last few years, opinions as to the long-term viability of both international accounting standards and US GAAP have moved up and down on almost a daily basis.   What do you think will eventually happen in regard to the differences that continue to exist between IFRS and US GAAP?

Denny:   The FASB and IASB are wrapping up work on four major convergence projects and on only one of them – revenue recognition – have they been able to reach similar conclusions. For financial instruments, insurance and probably even leases it appears U.S. GAAP and IFRS will continue to diverge. But these joint efforts over the past twenty years or so have substantially increased the quality of accounting standards around the world due in large part to the FASB’s willingness to take a bit of a “servant leadership” role during this period. In other words, while there has continually been insistence on the highest possible financial reporting standards, there’s also been recognition that all good ideas aren’t necessarily invented in America.

The end game has always been whether the SEC would eventually accept the IASB as the standard setter for GAAP as it applies to all U.S. public companies. While the Commission did make an important concession several years ago to permit foreign companies to follow IFRS in their SEC registrations, I’ve always felt that for legal reasons the SEC would be unwilling to cede accounting standard setting authority to a foreign entity over which it had no direct control. The SEC has continued to hold out some hope that it could still recognize the IASB if a number of specific conditions were met, but I think the chances of that happening are between slim and none.

So, to respond more directly to your question, I see the current situation as pretty much the environment in which accounting standards will remain for the foreseeable future. The FASB will continue to participate in the IASB’s Accounting Standards Advisory Forum, which will allow the two Boards to communicate on projects for which they have joint interest. And I am sure they will share research findings and look to each other’s conclusions when working on similar projects. But from this point on I don’t think that either body will put eliminating differences with the other at the top of its priorities.

NICE NEWS and GREAT STUDENT ADVICE

I got the nicest email a few days ago from the president of the American Accounting Association:    “I am happy to give you some great news: you have been selected as the recipient of the 2013 Innovation in Accounting Education award for your blog, Joe Hoyle: Teaching -- Getting the Most From Your Students. The award was established to foster innovation and improvement in accounting education through ‘significant programmatic changes or a significant activity, concept, or set of educational materials.’”

I was really thrilled.

 

As a result, I will make a 90 minute presentation on August 7 at the AAA annual meeting in Anaheim.   If you are going to be at that conference, I hope you will stop by.   

And, I want to thank everyone who reads this blog for helping to spread the word.   We have now had 78,000 page views over the years and my guess is that most of those hits came from you guys telling other folks about the blog.   So I believe that the above award should be shared with you.   Thanks!!!

**

For two days last week, Dennis Beresford – the former chairman of the Financial Accounting Standards Board – was on our campus.   He gave talks and presentations to several hundred of our students as well as over 100 members of the local accounting community.   It was a wonderful couple of days here at the University of Richmond. 

At one presentation, a student in the audience asked “What piece of advice would you give to us as college students?”   That was a very legitimate question to ask a person who has been so very successful in the business world and as a college educator. 

I did not try to write down every word that Mr. Beresford said in response but I did love his answer and I want to paraphrase it here.   He paused for a moment and then talked about students often being too interested in focusing on getting 120 hours of nothing but accounting.   He spoke about the importance of gaining a broader education and coming to appreciate classes outside of accounting and business.  

I wish I could have written down every word because it was a great answer.   I could not have agreed more to what he said.   A college education should be about creating a foundation for a thoughtful life rather than a quest for a first job.   Understanding accounting is, of course, important but college needs to be about more than just making sure the debits equal the credits.   If that is all a person wants to learn, life is going to be very dull.

After Mr. Beresford’s talk, I started thinking about how to encourage my students to develop that kind of attitude.   I certainly want my students to learn lease accounting and pension accounting but I also want them to appreciate art, literature, and the like.   How do you push a student to go outside of his or her comfort zone?

Luckily, registration for the fall semester is coming up so the selection of courses is on everyone’s mind at the moment.   I quickly wrote a note to our seniors graduating in accounting and asked each of them to hit reply and tell me the name of the best course they had ever taken at the University of Richmond outside of the Robins Business School.   I explained what I wanted to do and asked them to identify that special, non-business course.

Almost immediately, a long list of courses started pouring into my email account.   Several students listed multiple courses they would recommend.   I had not asked for any type of explanation but many of the students wrote out glowing comments about a particular course and what they had learned.  

To me, the list was thoroughly fascinating including such courses as Hebrew Prophets, Justice in Civil Society, The Propaganda State, Minds and Machines, Leadership and Economic Policy, Thomas Jefferson and Revolutionary American, Introduction to Film Studies, Civil Rights and Civil Liberties, Lincoln, Saints and Sinners in Muslim Literature, Elementary Symbolic Logic, Introduction to Environmental Studies, and Global Women Writers.

The list was so interesting that I was ready to go back to college and take many of the courses myself.

Then, I sent an email to all junior accounting majors here at the University of Richmond.   I started by discussing what Mr. Beresford had said.   Then, I added the entire list of “best courses” and explained that some other student just like them had picked each of those courses as the very best (outside of the Business School) that they had taken in four years here.  I strongly encouraged them to look at those courses and consider whether one or more wasn’t worth taking in the coming fall semester.

Did I change any minds?   I certainly hope so.   Students often need a little encouragement to explore going outside of their comfort zone.   But, from my experience, most of them do not need very much encouragement -- a little goes a long way.   This whole experiment probably took no more than 45 minutes of my time.   But I might have gotten some of our Accounting students to broaden their education a bit.   And, that, I think, is a worthy goal.   Just like Dennis Beresford suggested.

CREATING A TRUE SENSE OF URGENCY

I received the following email from Dennis Beresford about my previous blog posting.   In that earlier essay, I had indicated that I expected my students to study before each class as if a quiz were scheduled even though no quiz was going to be given.   I want them to motivate themselves to do the work rather than leaving the motivation up to me as the teacher.   It is their education.   They should care enough to have the discipline needed to do the work.

I have long argued that students will always do much better in any class if they feel a sense of urgency.   The only question is whether that urgency needs to be externally driven or whether the students can be expected to create it for themselves.  

As many of you will know, Professor Beresford served as the chairman of FASB (Financial Accounting Standards Board) from 1987 until 1997.   Since that time, he has been the Ernst & Young Executive Professor of Accounting in the J. M. Tull School of Accounting at the Terry College of Business at the University of Georgia.   Over the years, he has held an unbelievable number of other prominent positions in the business and accounting world.  

Professor Beresford writes here about his own undergraduate education and the method by which his accounting professor at the University of Southern California created that essential sense of urgency in his students.   I only have a few quick comments.

(1) – I would bet that the students walked into Professor James’ class each day extremely well prepared and, as a result, learned a ton about accounting.   He certainly understood motivation.   I just hope that none of the students had a nervous breakdown.  

(2) – Although this method of teaching seems a bit harsh, do note that it successfully created one of the most influential accountants of the past 50 years:   Dennis Beresford.   You cannot argue against that outcome.   I do not know what happened to all of the other students after graduation but this method worked extremely well in one case.

(3) – Faculty members often complain that students have changed over the years (they have gotten soft and lazy).   From this account, maybe it is not the students who have changed but rather the faculty members who have changed.   Perhaps faculty members were once more willing than today to put these kinds of demands on their students.

From Professor Dennis Beresford:

“I enjoyed your latest teaching blog, ‘There Will Be No Quiz.’  It reminded me of my own experience at USC where the professor who taught my two Intermediate classes and one Advance class had a policy of never announcing any of his exams (except for the final, of course). Yes, I meant to say exams and not just quizzes. So we came to class each period not knowing whether we would have a lecture and discussion of homework problems on the assigned topic or the entire period would be devoted to an exam. He announced this policy at the beginning of the semester and the students would start to anticipate an exam if we hadn’t had one for some time. But we never knew whether it might be in the fifth week, the seventh week, or so on. I can’t recall if we know how many interim exams we would have during the semester but I believe it was at least a couple before the final.

“Most students were aghast at this policy but I actually thought it was great. That’s because I was never a ‘study all night before the exam’ type of guy. I worked my way through school and almost always spent at least 20 hours at my outside job. But besides that it’s always been my approach to keep up to date with my classes or other obligations. I figured that if I didn’t read the materials and work the problems while they were fresh in mind I was losing the opportunity to take advantage of what I had heard in class and wouldn’t be able to ask timely questions to reinforce the material right away. I’m sure there were times when I went back to try to review things for an exam but not too many. I just tried hard to learn things well the first time around so I wouldn’t have to re-learn them again later. That served me particularly well in Professor James’ classes and it’s worked pretty well throughout my career too!”