The IFRS 8 row is still ringing in our ears

gavin hinks, accountancy age

The segmental reporting standard (IFRS 8) has prompted tension between
investors and corporate governance lobbyists on one side, and the International
Accounting Standards Boards on the other, as the standard setter keenly pushes
ahead with the standard.

It’s intriguing and yet reassuring that standards have become hotly
contested. The fact that a debate could reach the exalted levels of national
presidents, or be the subject for lobbying a European commissioner stresses
their importance. But on IFRS 8 everyone seems a little bit tarnished by the
efforts to sort it out.

Investors who claim it puts too much power in the hands of management
(executives) seemed to enter the debate very late on. The IASB could be viewed
as not having listened carefully and the European Commission moves too slowly to
offer anyone the prompt resolution that is required.

But as the debate enters its final stages the investors are at risk of
sacrificing a much greater goal, if they persist with their insistence that the
European Commission rejects IFRS 8. Firstly, it undermines the idea of the whole
planet working on IFRS because Europe would have jumped ship when it should be
sticking to the project. Secondly, it endangers the convergence project in which
the US comes over to IFRS. In return for that, the IASB has accepted a US lead
on IFRS 8. A quid pro quo? Possibly, but almost certainly for a greater good.

But there’s another question. Why should the EC accept direct petitions for
intervention when it has the IASB to offer recommendations? It might as well
create a new department of its own and pay Sir David Tweedie off. So far there’s
no need for that.

Related reading

Fiona Westwood of Smith and Williamson.