IFRS chair opens door for 'prudence' reintroduction

by Richard Crump

More from this author

16 Jul 2014

  • Comments
Michel Prada IASB trustee chairman

THE IASB appears ready to bow to pressure and reinsert a specific reference to the concept of prudence into the framework that underpins international accounting rules.

In an interview with Accountancy Age, Michel Prada, chair of the IFRS Foundation, the organisation that oversees the work of the IASB but does not influence the technical aspects of its work, said prudence should be reinserted into the global standard setter's conceptual framework if it makes investors and preparers "comfortable".

"I am a little bit uncomfortable that these philosophical issues are instated for other issues. People think true and fair view is a prudent approach, and if it is easier to make people comfortable by reintroducing a philosophical concept, then why not," Prada said.

The IASB is currently revising and updating its conceptual framework so that it provides more guidance on measurement, presentation and disclosure. A finalised framework is expected in 2015, although the board is "not very far" from reaching a decision on the thorny issue of prudence, according to Prada.

Policymakers and investors have repeatedly urged the IASB to reintroduce prudence at the "highest level" after a specific reference to the concept was controversially dropped from its conceptual framework in 2010 in favour of the concept of neutrality.

Hans Hoogervorst, chairman of the IASB, has so far resisted pressure to reinsert prudence into the framework, and has argued that the basic tenets of the concept remain intact and visible throughout IFRS.

However, Prada has indicated the board may be willing to revise its position in light of the criticism its removal has received from regulators, investors and politicians.

According to the IASB's May board meeting update, which took place after Accountancy Age spoke with Prada, the standard setter has tentatively decided to reintroduce prudence into the conceptual framework.

Read the full interview here

Visitor comments

blog comments powered by Disqus

Add your comment

We won't publish your address

By submitting a comment you agree to abide by our Terms & Conditions

Your comment will be moderated before publication

  • Send

Charterhouse Accountants

Finance Officer

Charterhouse Accountants, Beaconsfield, Permanent, Full Time, £ Competitive




Get the latest financial news sent directly to your inbox

  • Best Practice
  • Business
  • Daily Newsletter
  • Essentials


Search for jobs
Click to search our database of all the latest accountancy roles

Create a profile
Click to set up your profile and let the best recruiters find you

Jobs by email
Sign up to receive regular updates with the latest roles suitable for you



Why budgeting fails: One management system is not enough

If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.


iXBRL: Taking stock. Looking forward

In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.