European meddling in international standard setting might derail American
adoption of global accounting rules, the head of the US standard setter has
Robert Herz, chairman of the US Financial Accounting Standards Board (FASB),
speaking exclusively to Accountancy Age, said that the International Accounting
Standard Board’s (IASB) ability to resist undue European pressure will be a
“critical” issue as the US decides whether to adopt global accounting rules.
“It’s a very important factor,” he said.
“The US wants to make sure that the standards it uses come out of a standard
setter which has the appropriate public policy objectives and is not being
harassed to do things in a way that is not consistent with that public policy
US investors and politicians watched with concern as Europe pressured the
IASB to change its accounting rules in October 2008.
In an earlier speech at PricewaterhouseCoopers’ Meet the Experts seminar on
Monday, Herz pointed to “certain parts of Europe” undermining American
confidence in the IASB.
“[Investors] do look at what comes out of certain parts of Europe certainly
not this glorious island, certain other parts of Europe and there are concerns
especially among the investor community that what we may end up with are
standards which are not geared towards the public policy objectives that we hold
fairly sacred in
“As one congressman once said to me: ‘It’ll be a cold day in hell when I let
a Frenchman tell me what to do’.”
France and Germany have been the chief agitators within Europe, accusing the
IASB of moving too slowly following the financial crisis.
Herz is working with the IASB to converge US and international accounting
rules, in the hope that the world’s most powerful economy will eventually adopt
the global rules now used in 113 countries.
The task of convergence was made more difficult when earlier this year the
IASB released its fair value model which significantly differed with FASB’s
The fair value rule forces companies to value their assets at market prices,
rather than their original purchase price. It was blamed for exaggerating the
downturn in markets with little to no movement.
FASB’s proposal would see almost all assets measured at fair value, while the
IASB has put forward a mixed measurement model which would see some assets
valued at amortised cost.
In September, IASB chairman Sir David Tweedie told Reuters news agency
that FASB’s model was “not acceptable worldwide and in some segments of the
United States either.”
He later backed away from these comments and said: “though we have different
ideas about how we are going to deal with financial instruments at the moment,
that isn’t to say we’re not trying to get together.”
Herz said the IASB’s fair value model was important and “has to be very
strongly borne in mind” when deciding on a harmonised standard.
Tweedie is due to finish as IASB chairman in 2011, while Herz is finishing
from FASB in 2012.
Asked whether he would be interested in Tweedie’s job, Herz replied: “I have
no idea…I got my head focused on trying to focus on other things.”
IN OUR VIEW
Threats – empty, veiled or otherwise – by parts of Europe to dump
international standards hurt us all.Taking on international standards involves a
leap of faith. Attempts to undermine or control standards politically is short
sighted and narrow minded. And if the standards are compromised for the wrong
reasons, we all suffer.
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