IASB has abandoned prudence, professor warns

Annual reports have become “absurdly lengthy” and “virtually
incomprehensible” according to a senior professor, who has accused accounting
standard setters of doing away with prudence.

Professor David Myddelton, professor of finance and accounting, at Cranfield
School of Management, has taken aim at the international accounting standard
setter, which he claims has abandoned prudence as a core accounting principle.

He described accounting standard setters as “ultra-theoretical” and said that
they had “jettisoned prudence”.

Myddelton made the comments
a letter to the Financial Times
, in response to an
comment by Bournemouth University professor Stella Fearnley
, who accused the
International Accounting Standards Board (IASB) of doing away “with the
principle of prudence”.

Myddelton believes the IASB’s approach has led to lengthy annual reports
which are difficult to understand.

“What a pity that ultra-theoretical standard-setters around the world have
chosen to jettison prudence, a generally accepted accounting convention derived
from more than 100 years of experience,” he said.

“This high-risk approach has led to absurdly lengthy and unrealistic annual
reports that are now virtually incomprehensible.”

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