IASB moves on key G20 demands

The international accounting standard setter has moved to propose changes in areas demanded by the G20 Washington summit in October as a way of tackling the financial crisis.

The proposals mean the board has now met its Chrsitmas deadline for moving on issues surrounding impairment, embedded derivatives and difference in accounting for securities investments between IFRS and US accounting.

However, the IASB has announced no immediate changes as it did with the reclassification of assets earlier in the year. It has instead opened proposals up for consultation until the end of January.

Except on the ‘differences’ issue where the IASB has offered reassurances that changes expected from the US shortly should deal with the problems.

It is not clear whether the proposals will satisfy key members of G20, including the French who had earlier pushed for sweeping changes to the key standard IAS39 such that most financial assets would no longer be subject to fair value accounting.

The G20 demands are understood to have come from president Nicholas Sarkozy’s office.

IASB chairman Sir David Tweedie said on the changes to embedded derivatives: ‘In October 2008, in response to exceptional circumstances, the IASB amended accounting standards relating to the reclassification of financial instruments. Issuing that amendment without normal due process always carried the risk of unintended consequences, and these proposals seek to clarify the application of that amendment to embedded derivatives.'

There had been speculation that the IASB, working with the US standard setter FASB, would not be able to meet the Christmas deadline. Some sources had even suggested the IASB might might be reluctant to comply because it felt it must reiterate its independence from heads of state.

There is some regret at the IASB, especially with chairman Sir David Tweedie, that it felt compelled to make the reclassification changes to appease certain European states, notably the French. The reclassification changes are regarded as poor accounting at the IASB.

The IASB moved in early October to allow the reclassification of securities which eased the use of fair value, a move which headed off the prospect of the EU ditching the IASB’s advice and going it alone.

For full details on the IASB proposals go to www.iasb.org

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