CRITICS OF International Financial Reporting Standards have expressed dismay at the government’s dismissal of concerns over IFRS aired by the House of Lords.
A key finding of the report Auditors: Market concentration and their role was that IFRS limited the ability to exercise prudent accounting. The government said it “does not accept that IFRS has led to a loss of prudence”, saying “the concept of prudence continues to permeate accounting standards”.
Activist investor Tim Bush said: “Vince Cable does not seem in command of his subject. Prudence means not overstating assets so as not to overstate capital and profits. If he has not gathered that overstating banks’ dodgy assets in their accounts was the cause of the crisis, no wonder his banking initiatives have failed to show much clarity or direction.”
Brother in arms Gordon Kerr of Cobden Partners had similarly damning things to say about those who do not heed their IFRS warnings. Kerr recently advised Steve Baker MP on a private member’s bill, which posited that a lack of prudence meant banks should be forced to file accounts in both IFRS and UK GAAP.
Kerr recalled George Orwell’s famous quote to explain IFRS doubters’ position: “In a time of universal deceit – telling the truth is a revolutionary act,” saying: “The banking system is moving steadily into another chaotic crash, the scale, speed and effect of which is substantially attributable to the flawed IFRS accounting.”
The grandiose statement indicates the depth of feeling on both sides; IFRS critics are convinced it is only a matter of time before they are proved right in spectacular fashion, while opponents say they are irrationally partisan and obsessed with an imagined golden age of accounting standards.
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