Last week Bob Merritt resigned as CFO of Outback Steakhouse, citing the "increasingly negative regulatory environment in which we now operate" and his feeling that "the environment is not going to get any better anytime soon." He pointed to the "recent lunacy over lease accounting" as an example, and asserted that changing rules in this area represent a "complete failure of regulatory and other bodies that oversee financial accounting and reporting." Merritt asks, "if accounting firms can change their views on something like long-term lease accounting, setting off 150 restatements ... and then conclude that the companies have material internal control weaknesses, what's next?"
He claims that reporting about the restatements "is a strong reflection of the growing presumption that all business people are dishonest." He wants to say more on this topic, but feels restrained by the forum. For the whole announcement, listen to the webcast of Outback's first quarter earnings conference call (go to the 1:35:05 mark for Merritt's announcement).
The more we hear about the problems associated with financial reporting, the more this looks like a problem for which fingers can justifiably point in all directions. Merritt takes aim at auditors and "regulatory and other bodies" (a reference that is probably intended to include FASB, Congress, and the SEC). Why stop there? Certainly Merritt's own colleagues -- America's CFOs -- also deserve a share of the blame. And while many corporate managers are being demonized unfairly, there are plenty of genuine bad actors in that crowd, too.
If corporate America were a trauma patient working through the stages of recovery, we might conclude that it has passed through denial and shock, but has not yet worked through anger to get to resolution. I am tired of the anger stage. I hope the accounting profession gives us all a heads up when they are ready to move on to resolution.
Thanks to reader Timothy Lacy for alerting me to this story.
UPDATE: Here is the full text of Merritt's statement.
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