The Hindu Business Line : Home dreams and accounting holes thereafter

HERE'S more on the global front. Fannie Mae is "a private, shareholder-owned company that works to make sure mortgage money is available for people in communities all across America," as www.fanniemae.com informs. Instead of lending money directly to homebuyers, Fannie Mae works with lenders "to make sure they don't run out of mortgage funds, so more people can achieve their goal of homeownership."

What's making news, however, is the Rudman Report, due today, on `the company's massive accounting issues' that may lead to `a profit restatement of as much as $11 billion'. Thus informs http://today.reuters.com in a story dated February 21.

Red flags, embedded derivatives

Almost three times that amount is mentioned in a report on http://accounting.smartpros.com, where one learns about the Securities and Exchange Commission (SEC) accusing "two KPMG auditors who had overseen the audit of Royal Ahold NV's US Foodservice unit of failing to act upon numerous `red flags' amid the unit's estimated $30 billion accounting fraud."

Catch up also with a standard from the Financial Accounting Standards Board (FASB) on `the financial reporting of certain hybrid financial instruments'. The new standard allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis, informs SmartPros.

Islamic Professional Accountant

`CIPA certification courses launched,' informs Khaleej Times Online (www.khaleejtimes.com). The abbreviation stands for the Certified Islamic Professional Accountant, a course offered by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), the Bahrain-based world authority on Islamic financial regulations, "as part of its continued contribution to the Islamic finance industry".

Subjects covered include "Islamic economics and the financial system, Shariah and Islamic finance, Accounting and Auditing Standards, risk management in Islamic finance and products in the retail, corporate and investment banking operations."

48 new standards!

Starting from January 1, 2007, listed companies in China will need to adopt 39 new corporate accounting standards, while certified accountants will have to follow 48 new auditing standards, informs www.chinaknowledge.com, citing China Securities Journal. Accordingly, "Listed companies will have to provide relevant, authentic, reliable and impartial accounting information for users of financial reports, including production of balance sheets, income statements, statements of cash flows, and statements of shareholders' equity. The companies are also required to include the performances of their subsidiaries in the reports."

Goofy accounting

Enron's `goofy' accounting is what http://money.cnn.com talks about, covering the ongoing unearthing of the holes in the broadband division, `one of Enron's secretly troubled businesses.' Dismal state of affairs; but such things happen in governments too.

For instance, Dan Walters of Sacramento Bee hypothesises on www.shns.com: "Were California a corporation, its leadership, including all three most recent governors, would have long ago faced federal investigations." After giving a few examples, Walters gives up: "It would take a book — a very big book — to catalogue all of the Enron-like stunts that California officials have used to make income and outgo balance on paper."

Last week, www.accountingweb.co.uk reported about a House of Lords sub-committee that has launched "an investigation into why the EU (European Union) Court of Auditors has failed to issue a statement of assurance for the EU's accounts for the past 11 years?" Meanwhile, "World Bank is going to direct $20 million for a project on introduction of national accounting standards in Azerbaijan," as www.bakutoday.net informs.

Fellowship, Fraud Office

What happens after a university system review finds "lack of programme documentation"? Fellowship gets phased out, as www.dailyemerald.com says about Oregon University's Institute for Policy Research and Innovation. The report speaks about an allegation that it charged the students up to $20,000 without providing services it advertised!

No institution is sacred. For example, in New Zealand, "the Serious Fraud Office is defending its accounting practices after questions were raised about how it records internal costs," as http://tvnz.co.nz informs. "The SFO has only accounted for $326,000 during the failed prosecution of four men accused of defrauding the Auckland Rescue Helicopter Trust." Wonder if they are searching for the eject button!

D. Murali