Experts demand reform of international standards

Sir David Tweedie, chairman of the IASB

A group of experts hascalled for a radical overhaul of international accounting standards blaming them for producing "adverse consequences" in the financial crisis and describing them as "flawed".

The broadside came in a letter to The Times signed by eight academics, fund managers and politicians.

The letter said: "The Deputy Prime Minister is seeking views on repealing burdensome regulation. A good place to start is the International Financial Reporting Standards, (IFRS).

"Before IFRS the accounting ground rules were set down by Parliament, and their interpretation was delegated to the UK Accounting Standards Board, with the objective that accounts gave a true and fair view.

"IFRS introduced in 2005 via EU regulations undid that and is recognised to have been a major factor in mispriced credit going unchecked, leading to the financial crisis. Neither boards nor regulators have been successful in working with it."

The letter is signed, among others, by MP David Davis, chairman of the Future Banking Commission; Prof Stella Fearnley, University of Bournemouth; Prof Shyam Sander of Yale University, renowned forensic accountant Emile Woolf and Tim Bush, a member of the Urgent Issue task Force of the UK Accounting Standards Board.

The group accuses IFRS of helping overstate bank profits in the good times and accelorating their collapse when things turned sour.

They propose that accounting standards need more oversight even if that means putting them before the House of Commons.

"It is time that accounting standards were subject, once again, to scrutiny by a wider peer group than of late, and if necessary by Parliament. IFRS conflicts with the UK's traditional 'true and fair' view, and in practical terms has had adverse consequences. In our view it is time for a significant rethink. "

International accounting standards were introduced via EU legislation in 2005. They are set and managed by the International Accounting Standards Board (IASB) based in London. The standards have been adopted by 100 seperate countries. A central plank of the IASB's work is a convergence project bringing international standards and US standards into line.

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