Enron's multibillion dollar collapse is set to become the weapon the global accounting standard-setter has been looking for in its battle to convince the US to adopt international accounting rules.
Sir David Tweedie, International Accounting Standards Board chairman, and Allan Cook, UK Accounting Standards Board technical director, have indicated Enron’s collapse could not have happened under existing UK or global rules. UK standards are the closest in the world to international rules.
Tweedie is now likely to reapply pressure to US watchdog the Securities and Exchange Commission to allow American companies to use global rules. Both UK and global rules on off-balance sheet reporting, which brought Enron to its knees, are much tougher.
But FASB, the US standard setter, has consistently resisted attempts to push through an updated standard. Highlighting Enron’s off balance sheet reporting, Cook said: ‘The IASB would probably have got it on the balance sheet. It’s very tough.’
As if to show the US its determination, the IASB could issue an even tougher rule on off-balance sheet reporting, or derecognition, as early as next year.
The ASB is compiling research into off-balance sheet reporting to submit to the IASB in January.
Sir David Tweedie, IASB chairman, said: ‘This wakes people up to the fact that accounting matters. They are looking across at us. The UK is well ahead of the rest of the world on this.’
A letter to the Wall Street Journal last week by Joe Berardino, chief executive of Andersen, Enron’s auditor, also showed him in favour of a change in rules.