Overview: Charlie McCreevy - stuck in the middle

Charlie McCreevy, by Barker

European internal market commissioner Charlie McCreevy could perhaps be
excused for coming down with a severe case of claustrophobia. The German and
French finance minister on one side are voicing concerns about fair value
accounting. Investors and international bodies stand on the other warning
against political intervention in standard setting.

And at ground zero stands the European commissioner, watching as the two
tectonic plates converge.

What’s happened?

McCreevy sits at the pointy end of the European criticism of the
International Accounting Standards Board. It’s now no secret that the French and
Germans are unhappy with the work of the IASB, which is attempting to follow due
process as it revises its impairment and measurement rules.

With responsibility for policy which affects up to 480 million people across
27 member states, McCreevy has become the megaphone by which European finance
ministers voice their concerns about accounting.

Earlier this month, he found in his mailbox a letter signed by political
heavyweights German finance minister Peer Steinbrück and French minister of
economic affairs Christine Lagarde, outlining concerns about the review of
fair-value accounting.

It should have come as no surprise to the Irishman who has been on the
receiving end of European concerns about international standard setting for some
time. In the past, Europe has also signalled their reluctance to take on
international accounting rules for small to medium-sized enterprises.

European concerns about the international accounting regime were laid bare in
April when McCreevy refused to sign his name to documents underpinning a key
accounting oversight committee known as the monitoring board.

The documents were printed with space for five signatures. Four signatures
ended up on the document – McCreevy’s name was notably absent.

‘Seeing the reservations, particularly on the side of the European
Parliament, the commissioner intends to meet with the newly-elected parliament
to discuss further progress in autumn,’ said a statement from McCreevy’s office
when asked about his refusal to sign.

This week, a respected international body – the Financial Crisis Advisory
Group – returned fire, warning in a well-publicised report about efforts to
politicise accounting rules.

‘To develop standards that are high quality and unbiased, accounting standard
setters must enjoy a high degree of independence from undue commercial and
political pressures,’ the body said in its report.

What happens next?

In the Autumn, the new members of the European Commission will meet, and
McCreevy will likely be told whether to sign up or not sign up to the monitoring
board, in a move which may signal Europe’s future stance on international
standard setting.

McCreevy will also be keeping a close eye on the IASB’s review of IAS 39, the
fair value accounting rule used to value financial instruments and measure
impairment. Earlier this month the IASB released an exposure draft which was
well received internationally.

Watching from the sidelines is the US standard setter the Financial
Accounting Standards Board, which is in the midst of converging US and
international accounting rules and concerned with European influence on the
standard setting process.