Taking Stock: Robespierre, the IASB, historical cost and fair value

HANS HOOGERVORST, the IASB chairman, has been channelling some nifty pre-revolutionary France chutzpa in his latest speech this week.

The former Dutch finance minister was discussing what he calls one of the most difficult topics in accounting – how assets and liabilities should be measured.

Speaking at the IFRS Foundation’s conference in Paris, he name-checked the King Louis XVI-appointed Swiss banker Jacques Necker – France’s first minister of finance – whose primary role was to reform the tax collection system and bolster state coffers.

In 1781 Necker took the revolutionary step of publishing a financial report of the state finances, the Compte Rendu au Roi, with the hope that this attempt at transparency would improve the international credit status of the French state.

Unfortunately for Louis XVI, the Compte Rendu made painfully clear where the priorities of the French state lay. It showed that the costs of maintaining the Royal Court were equal to more than half of total military expenditures and were almost seven times higher than spending on roads and bridges.

It attracted a lot of attention, both in France and abroad, exposed the extravagances of the absolute monarchy and partly sowed the seeds of the French revolution.

Fast forward to 2015 and Hoogervorst’s outlined the benefits and challenges linked to the measurement models. He concluded that both the historical cost and current value (including fair value) have advantages and shortcomings and that therefore neither should be the overall preferred measurement model.

Far less Terror in that. And a quieter revolution too boot.

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