THE HEAD OF accounting standards setter the IASB has admitted that he may have been "a bit naïve" in his expectations of accounting before taking the job.
In a speech delivered at the International Association for Accounting Education & Research conference in Amsterdam, Hans Hoogervorst, chairman of the IASB, said he was "struck by the multitude of measurement techniques that both IFRSs and US GAAP prescribe, from historic cost, through value-in-use, to fair value and many shades in between".
"The multitude of measurement techniques indicates that accounting standard setters often struggle to find a clear answer to the question of how an asset or liability should be valued," Hoogervorst said.
He also said he found it "remarkable" that accounting standards can cause one and the same asset to have two different measurement outcomes, depending on the business model according to which it is held.
One of the biggest measurement dilemmas, Hoogervorst said, relates to intangible assets.
"The fact is that it is simply very difficult to identify or measure intangible assets. High market-to-book ratios may provide indications of their existence and value," he said.
"However, after the excesses of the dot com bubble, there is understandable reluctance to record them on the balance sheet."
During his speech, 'The imprecise world of accounting', Hoogervorst said accounting is one of the most controversial topics for regulators and policymakers to deal with.
"Accounting should be the most straightforward of topics for policymakers to deal with. Accounting is mainly about describing the past – to reflect faithfully what has already happened. This should be dull business, better left to ‘bean-counters'. Surely, counting beans cannot cause too many problems?
"Yet, over the years, many securities regulators have told me of their surprise upon finding out that accounting policy is one of the most difficult and controversial topics to deal with," he said.
Outlining why accounting can be so controversial, Hoogervorst pointed to the "inescapable judgement and subjectivity of accounting methods".
"Put simply, there is a lot to disagree about," he said.
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