International rescue

There’s a new voice issuing warnings at the International Accounting Standards Board. Tommaso Padoa-Schioppa, the recently appointed chairman of the IASB trustees, has made his mark by telling the business and accounting world that US adoption of global standards remains “highly uncertain”.

What’s happened?

As an opening gambit scare-mongering never impresses the people you need to influence. However, as a tactic for airing the most appalling possible outcome while you’re in charge it is invaluable. It starts preparing people for the worst – anything better is therefore a bonus. When it comes from someone of Padoa-Schioppa’s pedigree, it’s worth taking note.

With a background as an economist, a finance minister in Italy and an architect of the euro, the IASB has a man with real political clout and substantial intellect heading its trustees.

His warning went something like this. There is much opposition in the US to IFRS and that presents a risk to the June 2011 deadline for bringing international and US standards into line. He also noted that the EU funding to the IASB was also troubling. If European players decided they didn’t like the standards being produced they could refuse to pay their dues. IFRS 9 is on everyone’s mind – the new standard borne out of the financial crisis which is yet to receive EU approval.

What happens next?

That Padoa-Schioppa’s tenure looks like it will get off to a lively start should not really be a surprise. He is considered a founding father of the single currency, was chairman of the IMF’s policy committee, has been vice director general of the Bank of Italy, led the Basel committee on banking supervision and headed Italy’s financial regulator. He spent two years as finance and economy minister under Romani Prodi before Berlusconi took over government in 2008. A careful read through his comments indicates that something might be on the way. He said he would review the IASB’s scope, governance and financing.

These are worth addressing. The IASB’s money comes from many sources but remains reliant on the EU and US. And on governance the EU commissioner in charge of internal markets, Michel Barnier, has been complaining since he took office. The issue here is that Barnier believes the IASB remains unaccountable and that there needs to be more political control. He’s unlikely to get support from Padoa-Schioppa, who has described those who believe accounting standards should be made by governments as “nostalgics” – he won’t be handing over standard setting to the EU anytime soon.

However, he seems firm in his belief that the IASB is facing real threats and said that, in the “worst case” scenario, the challenges could threaten the very survival of the IASB “as it was originally conceived”. That’s an ominous sounding statement and those with an interest in seeing the IASB project succeed will be taking it seriously.