International Accounting Standards Board (IASB) chairman Hans Hoogervorst warned accounting should not raise unreasonable expectations as it is not an exact science.
During a his speech entitled The imprecise world of accounting, at the International Association for Accounting Education & Research conference in Amsterdam, Hoogervorst called for the world to remember, when putting pressure on the accounting profession in the wake of the financial crisis, that accounting uses human judgement and decisions.
Hoogervorst went on to stress that accounting can give a concrete contribution to business adding that the criteria when improving international standards should be realistic over what accounting can do and what it can’t.
“I believe we should be guided by the following three terms: principles, pragmatism and persistence,” the IASB chairman said.
Hoogervorst also addressed the issue of other comprehensive income (OCI) admitting the IASB should analyse the issue closer.
“OCI can contain very important information. It can give indications of the quality of the balance sheet. It is very important for investors to know what gains or losses are ‘sitting’ in the balance sheet, even if they have not been realised,” he concluded.