The International Accounting Standards Board’s (IASB) hasty
amendments to IAS 39 and IFRS 7 this month reflect problems that
can arise when standards are not converged, according to the
board’s chair, David Tweedie.
The standard setter rushed through changes to the standard to
allow for the reclassification of some financial instruments amid
pressure that if it didn’t act fast enough the EU would take
matters into its own hands, possibly by creating further carve-outs
of IAS 39.
The amendments brought the international standards into line
with US GAAP and answered concerns from Europe that European banks
were being disadvantaged compared to their US counterparts.
Tweedie told The Accountant the IASB would not have
made the reclassification amendments “had it not been for the
crisis”.
“Ideally, we would have liked the US to align their standards
with ours,” he said.
“What it does show is you can’t have two major standards running
in the world market. So I think it really emphasises the case for
convergence.”
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By GlobalDataThe international standard setter was reluctant to make the
reclassification amendments, however the political situation in the
US made it necessary.
The US was in the midst of pushing the high-profile Emergency
Economic Stabilization Act through Congress, which included clauses
that could pave the way for the suspension of mark-to-market
accounting. Therefore, the FASB was in no position to make any
controversial moves.
Following the reclassification amendments, and to strengthen
their stand for convergence, the IASB and FASB issued a joint
statement saying future moves would be made together – indicating
they were not willing to be played off against each other.
The IASB chair’s claims come in the wake of concerns from some
industry figures that the reclassification amendments are a sign
convergence between IFRS and US GAAP is now less likely. One
commentator was BDO International chief executive Jeremy Newman,
who on his blog, noted that at the Global Public Policy Symposium
in January, the talk surrounding convergence was of “when” not “if”
the US would adopt IFRS.
“I wonder if the discussions would be the same if we were
holding the meeting now,” he wrote.
Tweedie said the next steps for the IASB will focus on
“levelling the playing field further”.
The board is also in the process of establishing, with the FASB,
an advisory group to address issues relating to the credit crisis.
Speaking to The Accountant as it was going to press,
Tweedie said the IASB hoped to name the chairman of the group in
the next few days. The IASB has received widespread support within
the accounting profession for its reclassification move and the
political pressure against it has momentarily eased. However,
German Accounting Standards Board president Liesel Knorr has
suggested pressure could build up again in November as European
banks draw closer to issuing their year end financial
statements.
“I suspect she is right,” Tweedie said. “We will just have to
wait to see what happens.
CONVERGENCE
An absent roadmap
Two months after the SEC said it was about to publish a roadmap
outlining the steps to complete a US move to IFRS, the document
still has not appeared.
Industry figures are hoping this is because the US regulator is
caught up in finding solutions to the financial crisis, not because
it has got cold feet.
German Accounting Standards Board president Liesel Knorr
suggested the commission could be facing a psychological issue,
thinking ‘well in these difficult times we don’t want to let
go’.
IASB chair David Tweedie is slightly more positive.
“I still think they are hopeful of putting it out,” he said.
“They have just been swamped with all the other things that have
been going on.
“A few days after [the initial announcement was made] Lehman
Brothers went bust and since then all hell has broken loose. I
don’t think it is malevolent, it has just been everything
else.”
Carolyn Canham
