Overview: Christine Lagarde, French finance minister

She was a national synchronised swimming champion. But after cryptic comments
on accounting in an article last week, debate centres on whether the French
finance minister’s thoughts on international accounting standards are quite so
well co-ordinated.

What’s happened?
In truth not everything written by Christine Lagarde in the FT last week was
cryptic. In one sense, her comments were very bold ­ especially where she
explained that accounting standards were important to society.

It was in a piece on what she believes is the route out of the current
financial crisis. It was quite an insight into the French way of thinking and
probably inspired by the belief that they are not receiving a good press in the
UK for their economic policy.

But, for Accountancy Age readers, it will be her remarks on
accounting standards that really catch the eye.

She wrote: “Further progress is also needed on accounting standards.
Regulators should have their say on their ultimate purpose and ensure they do
not promote volatility. Market value must be used, when relevant, in considering
how a business uses its assets. But it should not be an excuse for failing to
measure, assess and account. This is not a political issue but rather a matter
of concern for society.”

What happens next?
Standard setters will be poring over those few lines to figure out just where
the finance minister stands on international standards and the principle of fair
value.

But it’s a fair bet that no one in accounting has read anything from a
politician quite so grand as an assertion that getting the accounting right is a
“concern for society”, even if they whole heartedly believe it themselves.

What will also leave them slightly stunned is the comment that market
valuation and the standards that govern them are “not a political issue”. This
is because if any politicians have been active in trying to influence the
attitude of the International Accounting Standards Board, undermine its
influence and reverse the fair value principle, its been the French. Until now
it was understood they simply did not believe there was enough political control
of standard setting and had even lobbied for a new standard setter based in the
EU.

What is Lagarde up to? A rapprochement with Sir David Tweedie, chairman of
the IASB, who, until now, seems to have only occupied the role of nemesis in
French economic thinking? That would be surprising given that Lagarde is known
to have even complained to business secretary Peter Mandelson at a meeting
earlier this year about Sir David’s stance on fair value.

Perhaps Sir David can expect a hearty French welcome the next time he lands
in Paris for a meeting.

The safe bet is that Lagarde’s comments are cleverly phrased to make it read
like the French are backing fair value but leaves the door wide open for an
attack if they feel the issue of fair valuations is not resolved to their
satisfaction. After all, she does say that standards still need work. Sir David
himself might agree with that. The difference between them might be on what kind
of work. In which case, we can expect the French to keep working on the
standards for some time to come.