Et, the extra-territorial

The SEC's past experience of European accounting and auditing partly explains why the Sarbanes-Oxley act was extended to cover European companies listed in America and their auditors, to the annoyance of European regulators, who grumble about extra-territorial laws. The European Commission is trying to soothe American worries. It wants EU countries to have national overseers of accounting standards and auditors by 2005, by when all listed European companies are meant to be using IAS. Besides Britain, so far Germany, Ireland and the Netherlands have made changes or announced plans.

The British think they stand a good chance of securing an exemption from the Sarbanes-Oxley act this year for their companies and auditors, because Britain's accounting and auditing regime is strong by European standards. The commission would prefer the EU to make its case as a block. But it could take years for the quality of, say, Italian and Greek auditing — judged poor by accountants farther north — to improve enough to satisfy the SEC.

One fix for auditing in Europe, thinks the commission, would be for all countries to apply the same audit rules, as devised by the International Auditing and Assurance Standards Board. However, experts on both sides of the Atlantic think these rules are too lax at the moment. "You could drive a Mack truck through them," says Lynn Turner of Colorado State University, a former chief accountant of the SEC.

Reform cannot come too soon. Because international accounting standards are mostly tougher than the old national ones, companies will try harder than ever to find ways around them once they come into effect. Already, French and German banks are campaigning hard against a new standard on financial instruments. Unless there is proper oversight soon, says Ms Knorr, European accounts will in future be full of what she calls "lAS-lite," meaning that they will pretend to obey international rules but in fact will not.

Behind all the prosaic initiatives for new rules and watchdogs lies a deeper struggle. American and European accountants are championing their respective sets of rules as the world's single accounting language. American GAAP is bound to lose importance in coming years, claims one European proponent of international rules. Soon, after all, some 7,000 European companies will be using IAS. But poor European enforcement and auditing, if it continues, may undermine the new standards. Unless Europe gets its act together, argues another fan of IAS, American accounting standards may win in the end.

The Economist

Note

ET, extra-territorial - перефразирование названия известного фильма ET - extra-terrestrial («Инопланетянин» 1982 г.) американского режиссера Стивена Спилберга

Vocabulary

disclaimer п	юр. отказ от права (на что-либо); отрицание; отклонение, непризнание (иска, права): опровержение
disclaim v	отказываться (от права); отрицать; не признавать (иск, право)
to disclaim all responsibility	отказываться от ответственности (за что-либо)
to disclaim all intention of doing smth	категорически отрицать намерение что-л. сделать
to rely on Syn. to count on, to rest on	1) полагаться на кого-либо; 2) основываться, основывать на чём-либо
to rely on the accounting standards	полагаться на стандарты бухгалтерского учета
enforcement n	принудительное применение (права, закона); обеспечение правоприменения в судебном порядке
lax a	1) вялый, нестрогий, нетребовательный; 2) неточный, неопределенный
watchdog n Syn. regulator	контрольный, ревизионный или наблюдательный орган

Useful Words & Phrases

to stop short of smth	отказывать от чего-либо; не делать чего-либо
to make one's case	доказать свою правоту; обосновать свою точку зрения; приводить аргументы в пользу своего предложения
to rule out	исключать
to flout (standards, rules)	пренебрегать, не выполнять

Exercise 1. Translate the following into Russian.

to send a disclaimer to the press; lax law enforcement; proper oversight; to champion one's own set of accounting rules; poor enforcement and auditing; to refuse to accept the accounts of the bank; to list the company; to disobey the international accounting standards; to ban accounting firms from undertaking non-audit work for audit clients; to be forced to restate one's accounts; to flout accounting standards; to let smb off; the main financial regulator; weasel words; watchdogs

Exercise 2. Translate into English.

обеспечить точность бухгалтерской отчетности; осуществлять надзор над аудиторскими компаниями; регулирующий орган; вводить прямой запрет на предоставление консалтинговых и юридических услуг; нарушать правила бухгалтерского учета; осуществлять проверки; обеспечение исполнения правил бухгалтерского учета; создавать новые стандарты; освобождение от действия закона в порядке исключения; доказывать свою правоту; нестрогие правила; представлять опционы в виде статьи расхода

Exercise 3. Translate the text.

The Nine Lives of Lou Gerstner The last American corporate hero comes under scrutiny

WHY, in an age of fallen corporate idols, does the Lou Gerstner legend endure? As the reputations of other retired hero bosses shrivel, the man who saved IBM strides from one triumph to the next. An autobiography has fared well in a hostile market, and in January the Carlyle Group, a powerful, secretive buyout firm, picked Mr Gerstner as its new chairman.

Yet Mr Gerstner's record is by no means squeaky clean. The latest evidence: this week's news that IBM's accounts, from a time when Mr Gerstner was in charge, are under formal investigation by the Securities and Exchange Commission (SEC). Judging by the skimpy information that IBM has put out, the SEC's interest may be confined to Big Blue's "retail store solutions" business, whose cash registers, bar-code scanners and the like make up less than 1 % of annual sales.

Yet interest in one area can lead to interest in another. Rival consultancies marvel at the fat, recession-proof margins of IBM's consulting business. Ominously, Wall Street's ever-bullish analysts are making soothing noises. In the 1990s, along with the likes of General Electric and even — yes-Enron, IBM came to be valued for the fast, steady and remarkably reliable way it raised its earnings per share. Also, like GE and others, the firm's occasional detractors argued that this owed more to its boss's genius for financial engineering than to his legendary management skills.

As the boom fizzled, and demand for IBM's hardware and services slowed, these critics said that Mr Gerstner used the usual bag of tricks to cover up the evidence. He extracted paper profits from the corporate pension fund, lashed the firm's tax rate, timed the realization of profits from asset sales to meet analysts' forecasts, and so on. As for disclosure, one well-timed asset sale (making the firm $340m) was not even mentioned in the relevant quarterly earnings report. After correspondence with the SEC in 2001, IBM agreed to give more prominence in its reporting to the way its pension funds padded profits. Due, in part, to more generous assumptions about future rates of return, IBM's pension funds that year earned the firm over $1.5 billion — 13% of profits, indeed, about half of the rise in IBM's annual profits in 1996-2001 came from its supposedly overfunded pension funds.

Things have been different since Mr Gerstner's departure. In April 2002, its new boss, Sam Palmisano, issued IBM's first profit warning in ten years. Its tax rate is rising again, and its expectations about the performance of its pension funds have fallen. Indeed, IBM is paying $3 billion to plug a sudden hole. Yet IBM remains loyal to Mr. Gerstner. That may owe something to his intimidating ways: he is still addressed at the company as "Mr Gerstner," in contrast to his successor, "Sam." And he does seem to have left the firm in good shape, accounting notwithstanding.

But LBM refuses to bow to shareholder demands that it strip pension income from profits when totting up executive bonuses, though GE and Verizon have done so. Meanwhile, much of Mr Gerstner's fortune remains tied up in IBM shares and unexercised in-the-money options. That should be some comfort to investors now wondering what, exactly, the Gerstner legacy has bequeathed them.

The Economist

Exercise 4. Translate the text in writing.