Sarkozy leads the charge towards IASB stability remit

Nicolas Sarkozy

The critical G20 meeting in Washington this weekend could move to
dramatically transform the remit of the international accounting standard setter
giving it responsibility for ‘financial stability’ as well as the transparency
of accounting.

The idea of a radically changed role immediately met with criticism that
‘financial stability’ would conflict with the
IASB’s remit to
ensure worldwide financial transparency.

It remains unclear whether the IASB could be forced to accept a stability
remit given its independence from national governments. There is speculation a
refusal could prompt an attempt in Brussels to claim the board is no longer a
relevant institution and that an alternative standard setter is required.

One observer said: ‘I am sure there are individual politicians with that
objective. There’s been opposition to the IASB ever since Europe decided to
adopt IFRS.’

French leaders are believed to be behind the proposal which was embedded in a
statement from European heads of state last week.

Ian Mackintosh, chairman of the
UK Accounting Standards
Board, said: ‘I don’t agree that standards should be set with prudential
regulation in mind.’

Meanwhile, experts warned of conflict between stability and transparency. Ken
Wild, IFRS leader at
Deloitte,
said ‘at one extreme’ a prudential regulator could suspend publication of
accounts to halt market panic – a measure diametrically opposed to transparency.

‘Hopefully G20 will stand back and ask what accounting is about, because it’s
about transparency and that’s a different subject to financial stability,’ he
added.

IASB trustees attempted to head off moves on stability by sending a letter to
President Bush this week for circulation to G20 leaders in which they say a
dialogue has already been opened with the Basel Committee on how standards work
with banking regulation.

However, trustee chairman Gerrit Zalm stopped short of accepting stability as
a remit for the international standard setter and asked for international
leaders to protect the independence of the IASB.

‘The primary aim of accounting standard setters…is to provide transparency
and comparability of financial information for investors and participants in
capital markets -an objective that should not be sacrificed,’ Zalm wrote.

A statement from Saturday’s European Heads of State meeting chaired by
Nicholas Sarkozy in Brussels said: ‘Standards bodies, in particular in the area
of accountancy, will have to be reformed to allow a genuine dialogue with all
the parties concerned, in particular prudential authorities.’

It is also said a review of fair value accounting was required to ‘improve
its consistency with prudential rules’.

Sarkozy, the current EU president, is expected to put the statement before
G20 as a framework for producing specific proposals over the next 100 days.