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.
