INTERVIEW-Plan B may keep accounting convergence on track – IASB

By Reuters Staff
January 18, 2010

By Huw Jones

LONDON, Jan 18 (Reuters) – A patch-up solution to keep the goal of a single global accounting system on track may be needed due to differences over how standard setters are reforming a rule blamed for amplifying the credit crunch.

Two rival accounting systems could feature extra disclosures allowing analysts to make comparisons between different fair value rules, the chairman of the International Accounting Standards Board (IASB), David Tweedie, told Reuters Insider.

The G20 group of leading countries has set a mid-2011 deadline for converging the world’s main accounting rules.

It is a long-time goal of multinational companies which want to cut red tape and would also make it easier for international investors to compare companies from different countries.

Two of the world’s top standard setters are reforming their fair value or mark-to-market rule which requires banks to value some assets at the going rate. It led to huge writedowns at the height of the credit crunch, sparking calls in Europe to curb its scope.

The IASB has begun changing its fair value rule in a move which UBS analysts say will reduce its use. The U.S. Financial Accounting Standards Board (FASB), however, has signalled it wants to broaden the scope of its fair value rule.

“The U.S. believes we should have more at fair value. We have not found that,” Tweedie said.

“What we can do? Plan B. If we can’t get the same answer, can we at least get the income statements the same. We should be able to do that.”

“At least we could get net profit the same… It’s not all lost if we can’t agree.”

Plan B would be to provide sufficient information in the disclosures so that analysts could compare banks reporting under both accounting systems on a like-for-like basis.

“The world wants one standard but we can’t force them and nor can they force us. We have to look at what our constituents said and they are pretty clear they don’t want to go to fair value, that’s why we have come up with plan B,” Tweedie said.

The European Union has yet to endorse changes made by the IASB to curb fair value, a step needed to make it mandatory in the 27-nation bloc which applies IASB rules.

Some EU countries feel the scope of fair value should be cut further but Tweedie is reluctant as some non-EU countries are already implementing the change on a voluntary basis.

“They are accepted by quite a large proportion of people we have talked to. We knew what the issues were and we dealt with pretty much most of them,” Tweedie said.

The reform simplified the rule, as the G20 requested, so that assets are either valued at cost or at the going rate.

“It’s all right to say ‘oh well, we would like other things at cost’. The question is ‘what exactly do you want?’,” he added.

“We will discuss it but that does not mean to say we are going to reopen it,” Tweedie said.

Meanwhile, the IASB is waiting to see FASB’s draft reform of fair value, due this year, to gauge its impact on convergence.

“If they go to full fair value, I can imagine people will say ‘forget it’. If they are pretty close but with a little bit more fair value then there is a debate to be had. It depends what they come out with,” Tweedie said.

The IASB is also consulting on how to reform the way bank loan losses are accounted for as the G20 wants banks to recognise losses much earlier to lessen the need for more huge taxpayer bailouts.

Tweedie said the draft reform is likely to change before final adoption later this year.

“We have said OK this may be too complicated. See the direction we are trying to go. How do we operationalise this and make it simpler,” Tweedie said.

(Reporting by Huw Jones, editing by Stephen Nisbet)

((Reuters messaging: huw.jones.reuters.com@reuters.net; + 44 207 542 3326; huw.jones@thomsonreuters.com))

1,318 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

Thanks much for one more info. It isn?t simple that sort expertise reading by means of homework, i’m keeping an eye out for.

whoa, this is a genuinely good piece of info. I read about something like this before, this really is impressively fantastic stuff.

Attractive section of content. I just stumbled upon your web site and in accession capital to assert that I get actually enjoyed account your blog posts. Anyway Iwill be subscribing to your feeds and even I achievement you access consistently rapidly.

I have been checking out a few of your stories and i can claim clever stuff. I will definitely bookmark your blog.

Nice blog right here! Also your site rather a lot up fast! What host are you using? Can I am getting your associate link on your host? I desire my web site loaded up as quickly as yours lol

Good post and right to the point. I am not sure if this is truly the best place to ask but do you people have any thoughts on where to employ some professional writers? Thx :)

Very nice info and right to the point. I don’t know if this is actually the best place to ask but do you guys have any thoughts on where to hire some professional writers? Thank you :)

fantastic issues altogether, you simply received a brand new reader. What might you suggest in regards to your publish that you simply made some days in the past? Any certain?

Hello. excellent job. I did not anticipate this. This is a splendid story. Thanks!

I want to express appreciation to you just for rescuing me from this type of situation. As a result of browsing throughout the internet and meeting suggestions that were not productive, I assumed my life was well over. Being alive without the presence of approaches to the issues you have fixed by means of your main website is a crucial case, and the kind which might have adversely damaged my career if I hadn’t noticed your web blog. Your primary knowledge and kindness in touching all the things was excellent. I am not sure what I would’ve done if I had not discovered such a subject like this. I can also at this time relish my future. Thank you very much for this skilled and amazing guide. I won’t be reluctant to endorse the website to anyone who would like guidance about this issue.

Hello my loved one! I wish to say that this post is awesome, nice written and come with almost all important infos. I would like to peer more posts like this .

Thanks for every other wonderful post. Where else may anybody get that type of information in such an ideal manner of writing? I have a presentation next week, and I am at the search for such info.

Your style is very unique in comparison to other folks I’ve read stuff from. I appreciate you for posting when you have the opportunity, Guess I will just book mark this page.

Great article! We will be linking to this great article on our site. Keep up the great writing.

Nice post. I learn something totally new and challenging on blogs I stumbleupon on a daily basis. It’s always helpful to read articles from other authors and practice something from their sites.

You’re so interesting! I do not think I’ve read through something like that before. So nice to discover another person with some genuine thoughts on this subject matter. Seriously.. many thanks for starting this up. This site is something that is required on the internet, someone with a little originality!

I couldn’t refrain from commenting. Well written!

Way cool! Some very valid points! I appreciate you penning this write-up and also the rest of the website is also really good.