A former chairman of America’s federal Deposit Insurance Corporation has called on the incoming Obama administration in the USA to start working on accounting reforms as soon as the new president takes office on 20 January.

Speaking to Accountancy Age a day after the decisive election of Barack Obama as the 44th president of the United States, William M Isaac said: 'I think generally that our accounting rules, as well as the way in which we set them, ought to be a very high priority for the Obama administration.' Isaac has been an outspoken critic of mark-to-market accounting rules and has participated in the ongoing review of the practice by the Securities and Exchange Commission (SEC).

Qualms over the state of the economy have thrust US accountancy rules into the limelight. Despite the fact that he did not address the issue publicly in his campaign Isaac said Obama should act immediately to suspend mark-to-market accounting rules and get the economy moving again.

'If I were president-elect Obama, I would make that my first order of business – even before I took office,' he said. 'Then we could look at other issues.' The SEC’s mark-to-market review is scheduled to be completed by January 2.

Isaac is one of many senior accountancy players in the USA waiting for signals from the new head of state about how he will address American accounting rules.

Neal E McGarity, a spokesman for the Financial Accounting Standards Board, said the FASB was prepared to wait to see how the new administration will address accountancy issues, given his immediate challenges of assembling a Cabinet and preparing to deal with two wars and a global financial crisis. 'It’s got to be very low on his list of priorities at the moment,' McGarity said. 'That’s many weeks down the road.'

In the meantime, the FASB said it would stick to supporting the September memorandum of understanding it framed with the International Accounting Standards Board (IASB), which – stressed McGarity 'reaffirms our commitment' to develop and maintain compatible reporting standards, maybe adopting International Financial Reporting Standards (IFRS) by 2014.

Barry C Melancon, president and CEO of the American Institute for Certified Public Accountants, said he hopes the Obama administration will move the USA toward adoption of IFRS. 'We hope that that gets done…we support a single set of high standards.'

According to Isaac, the current financial situation is made worse by laws that hold accountants liable for outrageous sums in litigation. He said the Obama should make changes to laws that force accountants to 'cough up hundreds of billions of dollars.' He said changes to liability laws should be a high priority, just after revisiting fair value accounting rules.

'Part of the problem we have with the accounting rules is the accountants have been sued for billions of dollars – that they’re so risk averse' that they do not want any rules that call for judgment because they are afraid of litigation. He said Obama should 'review liability and whether they ought to be held to such high standards in litigation.'

Melancon said the first priority of the Obama administration should clearly be a comprehensive effort to stabilize the economy, the 'most pressing' issue at stake. He said Obama 'understands that that’s critical and seems poised to identify the people to deal with that.'

Further Reading:

Asset or Liability: What Barack Obama means for you