Investors: IFRS unfit for purpose

INFLUENTIAL INVESTORS warned International Financial Reporting Standards are “unfit for purpose” in a straw poll at a recent corporate governance event.

Attendees representing the investment industry heard Ian Mackintosh, vice-chairman of standard setter the IASB, sparring with Ernst & Young audit partner Allister Wilson, during a discussion workshop at the International Corporate Governance Network’s annual conference.

At the outset, opinion was divided as to whether IFRS are fit for purpose, but chairman Liz Murrall said by the end of the session, “the result swayed more significantly into the no camp than it had before”.

Allister Wilson questioned whether one-size-fits-all works when accounting standards must fulfil such diverse purposes. These include providing information on stewardship, governance and sustainability issues, as well as to markets and regulators.

Value creation was also scrutinised, with Wilson asking what is meant by ‘value’ and what is reported as ‘performance’. He questioned the effect of mark-to-market and mark-to-model asset valuation, warning that unrealised value changes might be recorded in the profit and loss account and paid out in bank bonuses and dividends.

He called for a more detailed review of global standards, saying the IASB’s current agenda consultation is acceptable, but more should be done.

Ian Mackintosh called the IASB a success story, saying global standards are now accepted in more than 120 countries and high-profile non-signer the US will make a decision later this year.

In a second straw poll, attendees were asked whether IFRS were a contributory factor in the build up to the financial crisis, to which the vote was evenly split.

Related reading

Fiona Westwood of Smith and Williamson.