International accounting standards: only fools rush in

International accounting standards: only fools rush in

G20 leaders were too quick to rip into accountancy rules

Although largely ignored by the mainstream media, accountancy was a key issue
at the last G20. Indeed, French President Nicolas Sarkozy warned he would refuse
any agreement unless accord was reached on a more unified framework of
international accounting standards.

The outcome was that the G20 called on standard setters to make immediate
progress towards a single set of high-quality global accounting standards. ACCA
supports the principles-based IFRS, because they bring transparency,
comparability and clarity to reporting. However, the wording in the communiqué
seems to allow for the US to continue the bilateral IASB/FASB convergence. In
their response to the G20, the IASB and FASB reaffirmed their joint approach to
the financial crisis and to the overall goal of seeking convergence between IFRS
and US GAAP.

G20 leaders also called on the IASB and the FASB to:

  • Reduce the complexity of accounting standards for financial instruments and
    strengthen accounting recognition of loan-loss provisions
  • Improve accounting standards for provisioning, off balance sheet exposures
    and valuation uncertainty
  • Improve involvement of stakeholders in standard setting processes.

In response, the FASB and the IASB pledged to work quickly to replace
accounting standards for off-balance sheet and financial instruments accounting.

FASB and IASB also relaxed some parts of fair value or mark-to-market rules.
On the same day as the summit, FASB announced that it had voted to revise
accounting rules for first-quarter results. This was seen by some as a rash
decision.

ACCA believes the priority has to be effective enforcement of existing
regulatory measures. Making reactive announcements or rushing through new
legislation cannot be the answer. In areas such as accounting, over-prescribed
global measures could backfire. Issuing standards that result in mechanical
rule-following would be a recipe for disaster. Principles-based standard setting
and professional judgment have a vital role to play in supporting the economic
recovery.

ACCA does not believe that fair value accounting caused the banking crisis.
The calls to suspend it are equivalent to sweeping the problems under the
carpet, risking a further undermining of the remaining confidence in the
financial system.

Wyn Mears is director at
ACCA UK

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource