Overview: IASB’s new chief – in the danger zone

It is a body central to global business. But it has attracted little
attention on a broad scale, and particularly from politicians. Until now…

The International Accounting Standards Board is entering a new and perhaps
dangerous phase, as parliaments cast a beady eye over its decisions. Gerrit
Zalm, the new head of the IASB’s trustee committee, is the man tasked with
soaking up that pressure, and steering a course for the future through the
choppy political waters.

What’s happened?

As global convergence has picked up pace, so too has the IASB grown
accordingly in stature.

Over 100 countries have now switched their accounting systems to IFRS. Zalm,
55, is more than qualified for the job of managing the body’s growing pains.

He is the longest-serving Dutch finance minister, served as minister in five
Dutch cabinets from 1994 until 21 February 2007, and is known for the
implementation of a new budgeting system (the Zalm-norm). Zalm retains a
formidable reputation outside the Netherlands, and most notably in Brussels,
where his steadfast approach to European fiscal issues earned him the respect of
his peers.

Zalm’s task ahead lies not only in pushing along global convergence, but in
successfully lobbying stubborn constituencies who appear to be resisting it.
MEPs have been strikingly critical of the IASB recently, calling it
‘undemocratic’ and targeting a new segmental reporting standard in particular.

What’s going to happen?

Zalm met with his critics last week, in particular Alexander Radwan, a German
MEP who authored a critical report on the standards body. He also took the time
to criticize local carve-outs of IFRS and gave a timetable for US convergence.

Those are two of the big issues the body is facing, but Zalm may find that
his job involves more than just charm offensives in the corridors of the
European Parliament. Every time the body produces new ideas for company
accounting, and the row over how to report profits currently raging springs to
mind, the MEPs will want to have their say.

The IASB’s job is difficult enough at the best of times: balancing the
interests of different countries, the analyst and investor community, the
practice profession and the preparers of accounts. Hold politicians into the
mix, and the job just gets a whole lot harder.

Related reading