EoW January 2008

Transat lant ic Cable

An early challenge for the new standards chief will be the insistence of some governments on exceptions to the international accounting standards that they accept in broad outline. Acting at the request of French banks, the European Commission decided that European companies could ignore a section of one standard, dealing with derivatives. The EC charged the standards board with working out a compromise that would satisfy the banks. No compromise emerged from several rounds of talks.

Telecommunications

Europe activates its inquiry into Qualcomm royalty fees

After two years of apparent inactivity on the case, the European Commission on 1 st October, revived its anti-trust investigation of Qualcomm (San Diego, California), assigning priority status to it. In October 2005, six telecommunications companies accused Qualcomm of anti-trust violations in the licensing of its mobile phone technology. Qualcomm makes chips for cellphones and charges royalties to handset makers and chip makers that use technology covered by its patents. The petitioners – Broadcom and Texas Instruments (both US), Ericsson (Swedish), NEC and Panasonic Mobile Communications (both Japanese), and Nokia (Finnish) – claimed that Qualcomm’s royalty fees for next-generation mobile phone chips were excessive and an infraction of agreements to keep fees at reasonable levels. The EC said in Brussels that its in-depth investigation would focus on whether or not the licensing terms and royalties imposed by Qualcomm are ‘fair, reasonable, and nondiscrimi- natory.’ The move must not be taken to mean that it has proof of an infringement, the EC cautioned. But, fresh from its victory over Microsoft in September, the regulatory commission gave a strong impression of an agency in fighting trim. As noted by Dow Jones (2 nd October), if the commission does find against Qualcomm, it could fine the company as much as 10% of annual revenue and force it to change its licensing practices. International accounting standards are gaining acceptance in many countries and the US is considering adopting them beginning in early 2009. Meanwhile, on 18 th October, the body that governs the International Accounting Standards Board appointed a new chairman: Gerrit Zalm, who served as finance minister of the Netherlands from 1994 to 2002. Mr Zalm took office at the board, an independent accounting standard-setter based in London, as of the New Year. Backers of the standards board say they believe that it must be – and must be seen to be – an independent body that sets standards based on principles, not through a consensus of interested parties. That was the view of Paul A Volcker, a former chairman of the US Federal Reserve, who was the first chairman of the International Accounting Standards Committee Foundation. When Mr Volcker stepped down in 2005, the trustees of the foundation, which appoints members of the standards board and raises money for its operations, began a search for a chairman with a similar mind-set who was moreover known and respected by European governments. Two interim chairmen filled the post between Messrs Volcker and Zalm. Europe and America inch closer on international standards of accountancy

Academia

Foreign students at American colleges and universities contribute heavily to the US economy

According to a new report published on 13 th November by the Institute of International Education (IIE), foreign students in their growing numbers in the US are becoming an increasingly important economic force in the host country. The report found that, in the 2006-2007 academic year, the net contribution to the US economy of international students at American colleges and universities was nearly $14.5 billion – up a billion dollars from the previous year and the largest annual increase to date. Writing in the New York Times (‘Study: Foreign Students Added to Economy,’ 12 th November), Tamar Lewin noted these highlights of the report Open Doors 2007, which was largely financed by the US Department of State: The number of foreign students in American institutions of higher education, from community college to graduate school, increased 3% over the previous (2005-2006) school year, to 582,984. This followed three years of decline, and brought the total back to almost exactly the number of students who came to the United States for the 2001-2002 year, just before the 9/11 attacks; Those enrolling in the United States for the first time surged 10% in 2006, a statistic considered important because those students are likely to study in the US for several years; Overall, foreign students spent more than $20 billion in 2006-2007, about half on tuition and fees and half on living expenses. An estimated $14.5 billion came from the students’ home countries, mostly from personal and family sources. Fewer than one-third got their primary financing from US sources; The Institute of International Education is a non-profit organisation, based in New York, for the promotion of international study. Allan E Goodman, the IIE president, told Ms Lewin that students from overseas are a ‘huge factor’ in many American cities. For New York, where EuroWire has its US headquarters, Dr Goodman construed the importance of the visiting students in sports terms: “They contribute about $1.5 billion [to the city], more than the Yankees, the Mets, the Rangers, the Knicks, and the Giants combined.” ❈ ❈ ❈ ❈

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EuroWire – January 2008