ICAEW chief executive Michael Izza has said it is time to end the debate about the legality of IFRS and instead concentrate on making the standards work.
Last week, the FRC published a legal opinion from Martin Moore QC that appeared to quash concerns that international accounting rules conflict with UK law, while the Department for Business rubbished the claims as "misguided".
Doubts about the legality of IFRS were raised earlier this year by Lincoln's Inn counsel George Bompas QC, who identified inconsistencies between IFRS and existing company law, suggesting that company directors must override the standards in order to comply with competing legislation.
However, Moore has found that IFRS is legally binding and achieves a true and fair view in financial statements and could, in most instances, be achieved by complying with the rules.
According to Izza, it is time to end the argument. "The debate about the legality of IFRS has drawn attention to significant concerns about aspects of the current financial reporting framework. Perhaps it's now time to move on from the debate over legality and to concentrate on the changes needed to make the standards work," Izza wrote in his ICAEW blog.
"Alarm bells rang when the opinion of Mr Bompas cast doubt on the legality of accounts prepared in accordance with IFRS. This may have been unsettling to say the least for the large number of UK companies that prepare accounts in accordance with IFRS, and indeed to the users of those accounts.
"The clarification provided by the Moore opinion is also important as it should allow the focus to switch to resolving the many outstanding issues in financial reporting, such as the institutional challenges of global standard setting and the rising tide of complexity in financial reporting," Izza concluded.
As you state above; "'The debate about the legality of IFRS has drawn attention to significant concerns about aspects of the current financial reporting framework. Perhaps it's now time to .... concentrate on the changes needed to make the standards work,' Izza wrote in his ICAEW blog." Open admission then that the standards are flawed. Izza complete mess, obviously!
Posted by: Anonymous , 11 Oct 2013 | 23:53
As Michael Izza reportedly states above: "Perhaps it's now time to move on ... and to concentrate on the changes needed to make the standards work," Open admission that the standards are flawed. Some might say: "Izza complete mess"!
Posted by: Anonymous, 14 Oct 2013 | 13:46
The profession should start questioning whether faIr value accounting is in the public interest. Recent consultations suggest it is unsure of the meaning of the phrase.
It is accepted that the phrase "to serve the public interest" has no definition in UK law; nonetheless, it falls upon chartered professional bodies and standard setters to understand their raison d'être.
Standards aimed at the needs of short-term decision makers induce volatility. This is contrary to the wider public interest which demands financial stability.
Financial statements drawn up from the entity's perspective - and hence from the perspective of those who collectively control the entity - tend to deliver financial stability, principally because they enable the collective membership to take the decisions they are collectively required to take (often by law) concerning their entity (eg authorising the board to raise capital, redeem capital, distribute profits). This in turn requires the transparent reporting of realised and unrealised profits, PROPERLY DEFINED. The IASB preaches transparency but practices obfuscation on this point, among others.
The collective controlling membership and the entity itself are not recognised users in the IASB's present framework document, which places it at variance with its overidring constitutional objective of serving the public interest. The profession would do well to recall its overriding public interest duty as the IASB seeks to revise its Conceptual Framework. Aggressive tax planners should do likewise.
The present user groups might well be interested in the financial statements but this is secondary to the interests of the controlling members collectively and the company itself from whose perspective the financial statements should be prepared to better ensure financial stability in the public interest.
Posted by: Ian Sunderland, 15 Oct 2013 | 20:55
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