The man who killed UK plc

For a man who only wanted to work part-time developing accounting standards in the UK, Sir David Tweedie has certainly made his mark. With just a month to go before he hands over the reins of the UK’s Accounting Standards Board, he waxes lyrical of his passion for his job and love of a good ole traditional ‘oral’ punch-up.

‘A friend of mine once said I’d cross a motorway for a fight,’ laughs Sir David.

In his line of work he certainly needs the kind of characteristics usually attributed to boxers. His pugnaciousness is a prerequisite for the job of standard-setter and he explains that his successor will have to be as tough, if not tougher, than he was in order to take on the Americans in the global battle to harmonise accounting standards.

‘We’ve had some major fights with the Americans. Nothing personal, but pretty bloody. And these international debates can be pretty heated. I know it sounds ridiculous accountants getting all emotional,’ says Sir David, admitting the image is rather contrary to the public’s vision of the profession.

‘I think people are quite surprised of the ferocity of it. I mean people can be pretty rude to each other. They’ll have to be toughies. The softies will get squashed. They have got to be able to argue.’

Sir David got the job when accounting irregularities in British business were reaching their crescendo. At first he only wanted to work on a part-time basis because he was enjoying his job at KPMG as a technical expert.

But the government would not allow him to hold his post at KPMG as well as at the ASB for fear of potential conflicts of interest.

His senior partner gave him an ultimatum: ‘Either you take it or you shut up.’

‘Well that would have been impossible. I was furious about all the companies showing good profits and then going bust. It was madness,’ he says.

He admits to not having achieved all he wanted to. But says he has certainly done a lot more than he expected. There are however a few outstanding issues he would have enjoyed working on before the end of his tenure.

‘I’d like to have finished two things. One is the new standard on financial reporting which is a new income statement. We’ll put out an exposure draft but we won’t have finished it. I’d like to have done more on that. FRS3 was one of my hobby horses at the beginning.

‘I’d also liked to have finished the work on revenue recognition, which is when you take profits. I suspect the board will issue a document a couple of months after I go,’ explains the outgoing chairman. A touch of nostalgia is clearly seeping in.

Iosco endorsement The role of the ASB and its chairman is set to change quite drastically after the endorsement by Iosco, the international club of securities commissions, of a core set of international accounting standards. The accelerated drive for the world’s stock markets to accept international standards in all cross-border listings has added to the changing face of domestic standard setters.

National standard-setters will now have to focus on contributing to the international debate on the development and improvement of global accounting rules. They will also be the sounding boards and testing platforms for any new standards.

This however does not mean they cannot put forward standards they feel work well in their own countries. But they will have to win the argument to get a particular standard taken on board at an international level.

‘We have to select the best standards wherever it comes from and that depends on the arguments put forward,’ says Sir David.

Sir David is not however out of the standard-setting picture. On 1 January, 2001, he takes up his new position as board chairman of the revamped International Accounting Standards Committee. Hence his interest in the ASB taking on a hard-hitting candidate to succeed him. He knows the battles well.

He has been fighting them on a national and international level for the last decade.

Irrespective of the landmark rulings by Iosco and the European Union, which also endorsed the core set of rules in June this year, the real battles start here. To persuade the US Securities and Exchange Commission to swap its preferred model – the rule book – for principles, the preferred method for most of the rest of the world, will be one of IASC’s biggest challenges.

Bending the rules

The second most pressing issue is to cut out any loopholes allowing national regulators to bend international rules on accounting.

‘We have this opportunity at present. It may not occur for another 10 or 15 years. If we blow it, it may never occur again. And it could be blown by anyone second-guessing IASs,’ warns the soon-to-be international leader.

Sir David wants to get out there and start visiting the world’s regulators to find out why Iosco permits domestic regulators to demand additional disclosure or reconciliation from those companies that publish their accounts using IASs. ‘We want to find out what the real problems are that securities commissions have with the standards and how we can fix them. We’ve got to have one set of high quality standards. That means when a transaction takes place in Southampton, Seattle, Singapore or Sydney, we account for it in the same way. We don’t at present,’ he says.

He is also concerned that the debate on global accounting standards does not become political. Attempts in the US to see through a new standard on accounting for employee share options was met with a wall of resistance after business lobbied government to intervene.

Ironically, Sir David’s most recent fisticuffs with British business came over a UK proposal on accounting for employee share options, which is generating the amount of controversy he expected. If he had returned to academia after departing from the ASB, as he originally planned, UK plc would probably have rejoiced. But Sir David’s mantra, by necessity is ‘a true and fair view’ and that, he maintains, is not represented in the way in which companies currently account for share options.

‘I’ve already killed UK business about four times in 10 years!’ he says with weighty amounts of satire.

The contentious proposal on share options is to be one of Sir David’s challenges on an international scale. He promises this won’t be left for his successor to deal with. ‘The only way to do it is to do it together.

So I think that will be one of the international partnership projects run out of London,’ he explains.

So, with boxing gloves at hand, the accounting pugilist is set to step out of the UK arena into the international ring prepared to challenge those wanting to ‘second guess’ global rules and convince them of the benefits of harmonisation in the global village.

Tweedie on toughing it out

‘The toughest proposal I have had to see through to standard-form is off balance sheet financing.

‘It was not the one we had the most fuss about, that was acquisition provisions. But, it was the hardest. The real stand was the acquisitions provisioning. And there we have the toughest standard in the world.

‘Some of these schemes would be sold to a company for £100,000, so if you could sell that scheme to 100 companies, that’s £1m. The merchant banks had lawyers and accountants crawling over things trying to find a scheme that works its way around the rules.

‘We got rid of some of the early precedents with the Urgent Issues Task Force. We brought in finance directors and other outsiders from the big companies to work on stamping out irregular practices. As long as not more than two people voted against then we issued a rule which was binding on the company.

‘And people obeyed the UITF abstracts. If you didn’t obey the abstract, then it was probably not a true and fair view and you faced the review panel. The review panel is the teeth behind what we have done. Some people are still using Mickey Mouse figures, badly chewed up by the review panel.’

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