Barry Melancon, president and chief executive of the American Institute of CPAs, opened his annual remarks regarding the state of the profession at the Fall Meeting of Council and Members by addressing the current economic crisis and the controversy around fair value accounting.

Melancon (below) gave a primer on the Economic Stabilization Act passed last month by President Bush, clarifying that the term "Wall Street bailout" was a sound bite and a "few inappropriately muttered words that caught on" that ultimately became a disservice to the public. Melancon said that the act instead was about the financial services sector's impact on the millions of businesses in the United States.

"We did a lot of work with the media behind the scenes to get them focused on facts," Melancon said, adding that the institute provided a number of outlets to disseminate information regarding the issue, and that it supported a government intervention. "We thought it was important for the stability of our economic platform in the United States that Congress enact something to create a step forward."

One provision in the bill mandates a study of fair value accounting to resolve the lingering debate among banking groups, financial analysts, investors and auditors. While some in the banking community say the fair value accounting rules require banks to value many assets at fire-sale prices when they would prefer something closer to a hold-to-maturity price, many Wall Street analysts, investors and auditors believe that suspending fair value accounting could reduce transparency. However, Melancon noted that bankers are not necessarily opposed to the entire FAS 157 fair value accounting standard.

"When you hear people in the banking community say they are opposed, I think they are overstating their position," he said, pointing to the hierarchy of the three levels of input data for determining the fair value of an asset or liability as the slice under debate. "They really are opposed to some pieces of fair value accounting. The concern is in Level 3."

The AICPA, according to Melancon, supports the independent standard-setting role of the Financial Accounting Standards Board and an objective review of applying fair value accounting principles in inactive markets, and also has formed a Fair Value Resource Panel to identify the highest-priority member needs.

Following his summary of the economic crisis, Melancon talked about the "brand" of the CPA. He said that the consistent strengths of the CPA brand are resiliency in the face of crisis, yet resistance to re-invention. In a recent survey on the reputation of the profession, the AICPA found that 76 percent of the respondents were more confident in a job done by a CPA than a job done by an uncertified accountant. Concern about accounting fraud has decreased. In evaluating a business professional, the survey respondents viewed CPAs as the strongest on the two most important attributes: integrity and competence.

In January, a new partnership for high school juniors and seniors will team the institute with to educate younger generations about the profession. Fifty-five percent of young non-CPA accountants said they were interested in receiving the CPA credential, and 28 percent said they were interested in other specialized accounting credentials such as the PFS, the CITP, the ABV or the CFF.

AICPA senior vice president Sue Coffey talked about increasing recruitment for the peer review process.

"Two years ago we had 11,000 peer reviews a year and only 1,700 peer reviewers, and that was a significant decrease from five years previous to that," she said. "Of those 1,700, 90 percent were over the age of 40 and 45 percent were over the age of 55. We have a real problem, just like the rest of the profession, with the pipeline and getting people involved in peer review, and we need to do something about it."

New standards that go into effect in January will only require a team captain and review captain to enroll in a training course for peer review, she noted.

Melancon also gave an update on FIN 48, including the Financial Accounting Standards Board's decision to issue a proposed staff position to defer the interpretation for all nonpublic entities until fiscal years beginning after Dec. 15, 2008. He also noted that the recently introduced Certified in Financial Forensics designation has already attracted 1,945 applications.

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