Financial Regulatory Forum

ANALYSIS – Asia may have edge in top IASB accounting job

By Reuters Staff
February 15, 2010

By Huw Jones

LONDON, Feb 15 (Reuters) – The hunt for a new chairman of the world’s top accounting standard setter is sparking discrete jostling for a job Asian candidates are seen having the edge as economic influence shifts east.

International Accounting Standards Board Chairman David Tweedie stands down in June 2011 after a decade spent transforming an obscure committee into a board whose rules are effectively law in over 120 countries, including the European Union.

Japan, Canada, India, Korea and Brazil are also adopting IASB rules, with China bringing its domestic standards in line too. The United States is left increasingly isolated as it decides how to join the club and when.

The Asian crisis of the 1990s sparked the need for a global approach to accounting but the credit crunch politicised standard setting as policymakers changes after blaming accounting for amplifying fallout from the financial crisis.

A replacement for Britain’s Tweedie will need to be a skilled diplomat and comfortable debating the minutiae of financial reporting, industry officials said.

Which is why the hunt has started so early.

“If you look at requirements for the new chair, the only thing that is not included is that he should be able to walk on water,” said Stig Enevoldsen, chairman of the European Financial Reporting Advisory Group (EFRAG).

 

CRITICAL MASS

The growing power of the IASB has sparked concern in some countries — Tweedie was dubbed the “Accounting Ayatollah” in France — with U.S. Congress also leery of adopting its rules which would involve ceding regulatory sovereignty.

The EU gave the critical mass which helped launch the IASB’s rules on the road to becoming the global benchmark by mid-2011 and feels the board still owes the bloc a debt of gratitude.

But with several Asian countries, Brazil and Canada coming on board, there is discrete lobbying for Asia in particular to have a stronger say to counter EU clout.

EU finance ministers forced the IASB to speed up reform of mark-to-market rules last year to take pressure off banks.

This annoyed Japan and other Asian countries who don’t want one corner of the world determining rules the rest of the world has little choice but to adopt.

“We should be very mindful the standard setting process is not put under undue outside pressure. I will stop at that to be diplomatic,” Masamichi Kono, a vice commissioner of Japan’s Financial Services Agency, told an EU hearing last week.

Growing China-led Asian influence has just been enshrined in global bodies like the G20, Financial Stability Board and Basel Committee on Banking Supervision.

Britain, France and the United States are ruled out from the top accounting job for various reasons, industry officials say. A European from a small country like the Netherlands or Scandinavia would be possible, they say.

Canada’s Paul Cherry, a former chair of the Canadian Accounting Standards Board, and Jeffrey Lucy, chair of Australia’s Financial Reporting Council, are also mentioned as possible contenders.

“I think we have got to recognise in this global world, it might not be a man and secondly it may well come from somewhere else in the world like Asia,” said Michael Izza, chief executive of the Institute of Chartered Accountants in England and Wales.

Still, Lucy is already a trustee of the IASB and Cherry is chair of a body that advises the board, both of which could spark conflict of interest concerns in the selection process.

“Tweedie has been absolutely committed to a consistent, high global standard. We should not be looking to fixate on one region,” said Neil Stevenson, executive director for brand at the Association of Chartered Certified Accountants.

Experts warn a new chair will also have to keep existing users of IASB rules on board as well as pleasing newcomers.

“The most important thing is someone to lead that globoal mission. Stevenson said.

 

SPLIT ROLES?

Headhunter Spencer Stuart should look for a range of people that have different skills, a senior industry official said.

“I have suggested to the headhunters they should be looking to split the roles,” said Jeremy Newman, chief executive of BDO International, a global auditing firm.

The challenge of getting the right skills and geographical balance became easier on Monday with the announcement of a major revamp of the IASB’s constitution.

It will be possible to create two new vice chairs from March, paving the way for splitting tasks. [ID:nLDE61E156]

“There are two roles and it’s unrealistic to expect one person to cover both. There is a very strong technical role and there is a diplomatic and political role in terms of securing buy in,” Newman said.

This should make it easier to select a captain flanked by expert officers but even a chair who is a polished diplomat will need some accounting expertise.

“It will be good to have two vice chairs. However, the new chairman cannot be purely political, because he/she must also have the respect of the board members and the accounting environment on the technical level,” EFRAG’s Enevoldsen said.

(Reporting by Huw Jones, editing by Ron Askew)

((Reuters messaging: huw.jones.reuters.com@reuters.net; + 32 2 287 6817; huw.jones@thomsonreuters.com))

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