IASB: single set of accounting rules on track

By Reuters Staff
March 16, 2010

By Huw Jones

LONDON, March 16 (Reuters) – The world’s top accounting bodies are on track to thrash out a common set of rules by the middle of next year, the International Accounting Standards Board said on Tuesday.

The G20 group of countries set the ambitious deadline last year to make it simpler for cross-border companies and investors but differences over how to value some complex assets have raised concerns about the timetable.

Last month the U.S. Securities and Exchange Commission said it would commit to a new work plan that would delay any move to international standards until at least 2015.

The IASB, whose rules are used by listed companies in over 115 countries, including the European Union but not the United States, said it has stepped up meetings with its U.S. peer, the Financial Accounting Standards Board.

“In our soon to be published report, the Boards will state that despite the challenging technical issues to resolve, we remain on schedule to achieve the June 2011 target,” IASB Chairman David Tweedie told EU finance ministers in a statement made available to the media.

“These intensive discussions are achieving positive results. We plan to publish seven joint proposals in the next quarter. The Boards individually will also propose other changes to bring their own standards in line with each other,” Tweedie said.

The G20 also called for a simplification of the fair value or mark-to-market accounting rules used by standard setters.

NO MOVING TARGET

The IASB has already simplified its fair value standard, renamed IFRS 9, but the EU has yet to endorse it for use in the 27-nation bloc.

The original rule was blamed for amplifying the fallout from the credit crunch as it obliged banks to price assets at the depressed going rate, forcing them to make huge writedowns and find fresh capital.

Some countries like France worry the reformed rule will not lead to less use of fair value and that it may need further changes.

“For a traditional bank, being one that takes deposits and lends money to customers that it holds to collect principal and interest, we expect IFRS 9 to result in fewer rather than more items being measured at fair value,” Tweedie said.

He told ministers that several countries were already adopting the revised fair value rule and the IASB did not want its standards to be a “constantly moving target”.

“By completing our convergence work in 2011, the IASB will provide a period of stability of accounting standards for newly adopting countries, similar to the ‘stable platform’ given to European companies and investors between 2004 and 2009,” Tweedie said.

The U.S. FASB is expected to unveil a proposed reform to its fair value rule that banks fear will lead to a widening of its scope, a move that will make convergence trickier.

SEPARATE PROVISIONING STATEMENT

The G20 and regulators want banks to make earlier provisions for losses and lessen the need for more public bailouts but some accountants argue this could muddy the picture for investors.

The principle of building up buffers in good times for drawing down when markets turn sour has been agreed internationally but there is still debate over how this would be done in practice to meet regulatory and accounting concerns.

Tweedie put forward a compromise on Tuesday.

“Specifically, we have suggested … that an additional regulatory income statement could be required. The exact content would be agreed between the IASB and prudential regulators,” Tweedie said.

“Prudential supervisors could use this statement as a basis for imposing relevant restrictions on distributions or compensation,” Tweedie added.

The statement would show the adjustment to the net profit after tax for the items regulators require such as the build up or draw down on buffers.

“It’s a very good attempt to reach a compromise. I hope the regulators will look at it in that way,” said Ian Mackintosh, chairman of Britain’s Accounting Standards Board.

(Reporting by Huw Jones, editing by John Stonestreet/Ruth Pitchford/Susan Fenton)

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

No comments so far

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/