Two for the Road

Readers comment on accounting standards and other issues.


CFO welcomes your letters. Send them to: The Editor, CFO, 51 Sleeper St., Boston, MA 02210

E-mail us at, or contact a specific author by clicking on his or her byline. You can also post a comment directly on by clicking on the appropriate link at the end of any article.

Please include your full name, title, company name, address, and telephone number. Letters are subject to editing for clarity and length.



It is a shame to see both the Financial Accounting Standards Board's Robert Herz and the International Accounting Standards Board's Sir David Tweedie leaving their respective organizations ("Herz Closes the Books on FASB Tenure," Topline, October). They are both great thinkers, but they are also both dealing with a standards-setting process in crisis.

I guess both are very frustrated now. There are too many projects on the agenda and too many combined FASB/IASB board members to properly debate the issues. Joint board meetings are too rushed. As a member of the Lease Accounting Working Group, I am following the lease project that will front-load expenses for lessees, back-load revenue for lessors, and consume great amounts of banks' precious capital, as they are both lessees and lessors and are negatively impacted on both counts. Herz tried to make sense of the lessee and lessor sides and Tweedie fought for more-sensible lessor rules, but both were voted down.

I hope CFO magazine runs an in-depth story on the impact of the lease project and its issues on businesses that lease (and virtually all businesses lease real estate and equipment), as it could be the project that causes the largest charge to capital and earnings of any other accounting project.

Bill Bosco
Leasing 101
Suffern, New York



Smaller May Be Better

More articles like "Becoming Attractions" (September) are needed to improve companies' understanding of the private-equity world and how such groups can be useful in creating shareholder value and liquidity. However, there was a quote in the article that implied that a minimum EBITDA (earnings before interest, taxes, depreciation, and amortization) of $10 million is needed to access the private-equity market.

Actually, the private-equity world has reached down into the lower middle market over the past few years and a broad group of private-equity firms targeting deal sizes down to $2 million has established a niche in the market. As an investment bank, my firm actually specializes in representing sellers with EBITDA typically of $2 million to $5 million, and there has been no shortage of private-equity firms that are interested in evaluating our deals.

In addition, smaller companies that are considering a sale should be aware that often the best buyers are private-equity groups that specialize in large deals that already have an investment in the seller's industry and are thus interested in smaller, "add-on" investments.

James A. Lisy
Managing Director
Raintree Capital Partners LLC



Show Shareholders Some Respect

The article "Who's in Charge Here?" (September) is condescending and dismissive to shareholders. I found it arrogant when the article described new governmental rules such as say-on-pay and proxy access as "goodies" and "shiny bikes." Make no mistake: the reason the Securities and Exchange Commission granted shareholders these rights was precisely because boards of directors and executive managers continually fail to listen to their owners — the shareholders. The new, narrower definition of exclusions sprang up because many directors and executive managers of publicly held companies continue to treat their shareholders shabbily in regard to openness, transparency, access, and communication.

I disagree that getting a shareholder proposal on the ballot is "easy to play." As a shareholder proponent for several proposals in the mid-2000s, I found the process of ballot access to be one-sided (favoring the corporation) and massively legalistic. It is neither easy nor cheap for a shareholder to gain access to the ballot. When shareholders do manage to obtain access, it is generally because it is believed that the proposal will somehow improve the corporation or provide better return or value for its owners. Not all proposals should pass, but it should be up to the owners to decide once a proposal makes it to the ballot. Shareholder owners are collectively a pretty smart group; and, after all, it is their money.

Shareholder owners can and will sell their shares and "vote with their feet" if necessary, but a better solution would be for boards and chief executives to acknowledge shareholder owners and create methods for inclusion and communication that go well beyond that which exists today.

Christopher A. Smith
Lafayette, California



The Importance of SAS 70

Your discussion of the inherent limitations of SAS 70 reports in the evaluation of IT vendors was excellent and will be of great assistance to your readers ("The Truth About SAS," September). However, based on my practice as a corporate attorney who works on many IT contracts, I think there is another side to the story that needs to be taken into account.

You are correct that SAS 70 reports are not a panacea or, as one of your sources said, "a replacement for good old-fashioned due diligence," and that they must not be seen as a guarantee of quality or security. However, while some businesspeople will greatly benefit from this advice to look beyond the SAS 70, in my experience they are in the minority. There are many who will not insist upon at least a SAS 70 report of some sort when vetting vendors, but who will proceed primarily on word of mouth, price, personal relationships, or something else, without independent corroboration of vendor capability, even for mission-critical projects.

In my estimation, the report should be considered a necessary, but not sufficient, condition for entering into mission-critical engagements. That is, the absence of the report in such situations should prompt concern and other inquiries as to a report's usual subject matter on the customer's part, but its presence should not end the analysis. Once the report is obtained, readers must take into account the various limitations and other considerations that you so aptly enumerate to ensure that the vendor's services are likely to be satisfactory in the customer's specific circumstances.

Marty Robins
Law Office of Martin B. Robins
Buffalo Grove, Illinois


Read next:

Finance At BeyondCore