The IASB has a lot on its plate at the moment. It’s attempting to converge US
and international accounting rules while also fighting a rearguard offensive
from Europe which is yet to adopt its reformed fair-value rule for measurement,
released in the wake of the crisis.
In this climate the body should perhaps reconsider another battle over a
standard that many wise accounting heads believe isn’t broke. Efforts to reform
IAS 37, specifically on how to record and measure non-financial liabilities,
have been ongoing for five years and grew out of a review of
Five years is a long time to have proposals in discussion and, if initial
feedback is anything to go by, the IASB will have an uphill battle getting these
reforms out the door by June, to the satisfaction of current IFRS users and the
US, which has totally different rules.
Accounting for these sort of difficult-to-calculate liabilities, such as
court cases, is hardly a critical issue at what is a critical time in the IASB’s
Perhaps this issue should be laid aside and revisited when the US signs up to
international standards and the global accounting regime is more balanced and
Perhaps then there could be another comprehensive review of the entire
standard. In the meantime, there are enough battles to fight for the IASB.
Pre-packs need reform, but not too much
Ian Lucas, the minister for business, has to be careful he doesn’t throw the
baby out with the bathwater when reforming pre-packaged administrations.
They have so far proven an efficient and cost-effective means to give a
company a fighting chance of survival, while also offering creditors some chance
of recovering their cash.
The need for independence and oversight is vital, however, when this
increases the overall costs and draws the entire process out, it becomes self
Lucas also has to outline what the problem is. What needs fixing. Any reforms
will need to take into consideration the overall purpose of pre-pack
administrations and whether this will be compromised.
And then there’s the possibility it will lead to an old boys’ club within the
profession. Pre-packs might be unpopular among creditors, but they have proven
effective in saving jobs.
Any changes made to the process need to be undertaken with this fact in mind.
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