McKinsey Strategy has a good piece on why accounting shouldn't drive strategy, exemplified with pensions accounting. While I fully agree with that statement, I think it's quite idealistic to the point of being utopian. It would be utopian to expect of preparers that they wouldn't use the possibilities they have to look as good as they possibly can. A mild form of such behaviour would be just presentational, i.e. immaterial, but as we know, accounting often drives transactions without any real economic motivation.
The only way out of this quandary is to devise financial reporting standards that make sense economically, i.e. under which you can only look good if you behave rationally economically. This is the purpose of the CFA Institute's Comprehensive Business Reporting Model with its thrust for full fair value accounting. That's when accounting comes full circle with enlightenment philosopher George Berkeley: Being is perceiving and being perceived.
Wednesday, February 14, 2007
The January/February issue of the CFA Institute's Financial Analysts Journal is fully dedicated to pensions and retirement provision from an asset management perspective. Essential reading for all subscribers to this blog!
Tuesday, February 13, 2007
IPE has an interesting story about German insurance LV 1871 bringing its pan-European pension fund to Liechtenstein. Other institutions are also confirmed to be interested in this location, which is entirely in line with our assessment of Liechtenstein as one of the competitive locations for European IORPs.