Wednesday, January 14, 2009

Innovation versus Inventive

“Why Accounting Can’t Keep Up with Financial Innovation,” a CFO Blog from 01/12/2009 written by Tim Reason,( cites innovation as the perpetrator of evil undoings. It is unfortunate that the GAO chose to use the term “innovation” instead of using a less technologically associated term when referring to unique, pioneering or inventive financial malfeasance. While innovation does envision new and a more packaged offering and involves the “bright shiny object” paradigm, it also invokes an idea that technology was a component of the creation. The perception is that the innovation is one of disruption. In this case the disruption was more an effort to circumvent the basic rules instead of to introduce true innovation. Non-disruptive technology can be innovative without being speculative or corrosive to basic ethical principles and guidelines. Financial innovation should be the hallmark of any Office of the CFO or Controller who is fiscally responsible and actually altering their assumptions in their planning and budgeting process in the attempt to improve their cash and revenue instead of find less-than-acceptable means of generating paper profits. Maybe a new policing body should exist that prevents accounting rulemakers from accepting the use of any instruments that were designed by non-practitioners and applaud the use of technical innovation that supports and enforces legally acceptable processes. This is the heart of governance and compliance applied to innovation.

1 comment:

Central Bank Offers Help said...

The Federal Reserve despite hard efforts has been unable to narrow the gap between the consumer’s borrowing cost and government’s interest rate. This is affecting both the government and the common people. It is also been seen as one of the delaying factors for economic recovery.
There is some good news, however - the Central Bank is getting all geared to buy the Treasury debt. If they do so, the mortgage rates and auto loans will again become affordable. What’s more, the borrowing costs will also reduce. The Central Bank is expected to start this buying soon. Let’s wait and watch how this benefits our country.