Accounting Lunacy, Indeed
THE STORY WOULD have been easy to miss. Robert Merritt, chief financial officer of the Outback Steakhouse chain, announced his retirement because of the difficulties of accounting for restaurant leases. "Recent lunacy over lease accounting took me past the breaking point," he said, noting that more than 150 companies have been forced to restate earnings because of the issue.
Every CEO and C-level team is feeling Merritt's pain. The accounting, auditing and lawyering clearly have gone too far. The partners of outside auditing firms have become more conservative than ever, refusing to sign off on many transactions and practices that have been allowed for years due to worries about what the Public Company Accounting Oversight Board might do or say. That auditor must get the opinion of a "concurring" partner for every serious decision and a third partner may get involved if there is a filing to be made to the Securities and Exchange Commission (SEC). If those partners can't reach consensus on a subject such as "revenue recognition," the issue gets kicked upstairs to a national review process inside the audit firm and possibly reaches the point of arbitration. …