Sarkozy leads the charge towards IASB stability remit

The critical G20 meeting in Washington this weekend could move to dramatically transform the remit of the international accounting standard setter giving it responsibility for ‘financial stability’ as well as the transparency of accounting.

The idea of a radically changed role immediately met with criticism that ‘financial stability’ would conflict with the IASB’s remit to ensure worldwide financial transparency.

It remains unclear whether the IASB could be forced to accept a stability remit given its independence from national governments. There is speculation a refusal could prompt an attempt in Brussels to claim the board is no longer a relevant institution and that an alternative standard setter is required.

One observer said: ‘I am sure there are individual politicians with that objective. There’s been opposition to the IASB ever since Europe decided to adopt IFRS.’

French leaders are believed to be behind the proposal which was embedded in a statement from European heads of state last week.

Ian Mackintosh, chairman of the UK Accounting Standards Board, said: ‘I don’t agree that standards should be set with prudential regulation in mind.’

Meanwhile, experts warned of conflict between stability and transparency. Ken Wild, IFRS leader at Deloitte, said ‘at one extreme’ a prudential regulator could suspend publication of accounts to halt market panic – a measure diametrically opposed to transparency.

‘Hopefully G20 will stand back and ask what accounting is about, because it’s about transparency and that’s a different subject to financial stability,’ he added.

IASB trustees attempted to head off moves on stability by sending a letter to President Bush this week for circulation to G20 leaders in which they say a dialogue has already been opened with the Basel Committee on how standards work with banking regulation.

However, trustee chairman Gerrit Zalm stopped short of accepting stability as a remit for the international standard setter and asked for international leaders to protect the independence of the IASB.

‘The primary aim of accounting standard setters...is to provide transparency and comparability of financial information for investors and participants in capital markets -an objective that should not be sacrificed,’ Zalm wrote.

A statement from Saturday’s European Heads of State meeting chaired by Nicholas Sarkozy in Brussels said: ‘Standards bodies, in particular in the area of accountancy, will have to be reformed to allow a genuine dialogue with all the parties concerned, in particular prudential authorities.’

It is also said a review of fair value accounting was required to ‘improve its consistency with prudential rules’.

Sarkozy, the current EU president, is expected to put the statement before G20 as a framework for producing specific proposals over the next 100 days.