IFRS critics see momentum gathering

CRITICS OF international Financial Reporting Standards said recent events bear out their fears over a lack of prudence in the global guidelines.

Ireland's Central Bank is considering forcing financial institutions to set aside cash for expected losses, rather than incurred losses only as is currently required.

Steve Baker MP (pictured) recently brought a member's bill calling for banks to report in both IFRS and UK GAAP, saying this would ensure more prudent accounting for losses.

He said the Irish debate is evidence of growing concern over the international standards, and pointed to France – where IFRS is not in use and there has been no collapse of the banking system – as proof of the inherent dangers.

"Banks silently destroy their capital under the guise of profit, then they require taxpayer support, then the process starts again. The prolonged destruction of banking capital is disturbing normal credit intermediation and once again threatening the financial system," he said.

However, other experts have questioned Baker's arguments, claiming UK GAAP was no more prudent than IFRS and worked in a similar way, meaning provisioning for losses would be the same under both systems.