The challenge of implementing IAS across Europe and beyond
It’s fun. It is very different to the UK. You have to make sure that the preparers are happy, auditors are happy and the analysts are happy.
Well at least content. You do all that and then some countries fall overboard and you’re trying to balance different cultures, different attitudes to accounting and different traditions. Trying to deal with that – to get a common view internationally – is harder.
On how the IASB will get the new standards through in a very short timescale
Our technique is to say we want to try and write what we call an 80% standard. That means we will deal with 80% of the problem, the guts of the problem. We can do that in 40 to 50 pages. If you want us to deal with 95% of the problem you are up to 300 pages, and we do not want to go there. When we try and write the standard we are asking the project manger to stand up and, in one minute, tell us what the standard is and what the principles are. The rest should focus on how to implement it.
Why IAS is being introduced
We are doing this probably for two reasons. The first reason is for multinationals, which are dealing with subsidiaries perhaps in as many as 60 countries worldwide with 60 different ways of accounting. They have to get teams of accountants to convert these back to UK standards or US GAAP or whatever.
The second reason really came out of the Asian crisis – companies that looked fine in the Far East then suddenly they have gone bust. Short-term investment pulled out so interest rates rocketed and investments stopped, growth stopped and unemployment ruled.
What we are after is one single set of high quality, global standards, so it doesn’t matter if you have transactions in Brussels, Boston, Birmingham or Brisbane. We are going to do it the same way. If you look at Europe, presently 15 different counties have 14 different accounting systems with the UK and Ireland doing it the same way. By next year 91 countries will either mandate or allow these standards, and that is throughout the world.
On pension standards FRS17 and IAS19
I think that FRS17 was the best standard we ever did at the Accounting Standards Board. You have to ask why did companies take pension holidays right through the nineties. And then why were the funds short? It was because we assumed the stock market was going to keep going up. But it didn’t and it never does. Previously, all that happened was that you may even have been showing that assets are in surplus in the fund, even though they are in deficit. That is just lunatic accounting. Try and explain that to my granny.
On the standard-setting process
Standard setting has to be by committee, because sadly they won’t allow me to get away with it all the time. It’s just as well because I get things wrong too.
On how the UK compares with other countries
There is no doubt about it that the UK has one of the best professions in the world and the ASB has agreed much of the line on the stuff that the IASB are doing.
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