Accounting Standards: too important to leave to accountants

European Commissioner Charlie McCreevy has gone public with his concerns about role and structure of the International Accounting Standards Board. In his usual direct way McCreevy has pointed out that: “Accounting is now far too important to be left solely to accountants!”

Speaking at a recent European Commission’s conference, Financial Reporting in a Changing World,  McCreevy said that EU finance ministers regarded the IASB as being  “out of touch with today’s reality”  with an approach to standard setting which was too academic.

The governance of the IASB has come under close scrutiny in recent months and McCreevy’s comments revealed  the considerable tension that exists between the accounting standards setter and its sponsors. The board’s funding appears set to change following the European Commission and Parliament’s approval of a direct funding model. It’s clear that funding would come with strings with McCreevy noting that the money would be “conditional on further concrete improvements in governance at the Board.”

The Commissioner tipped his hat to the reforms achieved to date, but flagged up three issues still outstanding:

  • the geographic composition of IASB board members: there should be a greater link with the countries that actually apply IFRS;
  • proper due process: the importance of consultations, due process and feedback should not be underestimated; and
  • a balanced Board with members with more practical experience and not just theoreticians.
The pace of change at the board has clearly worried ministers with concerns that delay will undermine the global reform agenda. 
John Smith, IASB board member, also spoke at the conference and acknowledged the board’s acute awareness of the attention that political leaders have been giving. Without any clear view of the baord’s roadmap he confirmed the board’s public position stating: “We at the IASB have been and remain committed to responding in an urgent and responsible manner.” What that response will be in terms of board governance and stakeholder input remains to be seen.

Links

Commisioner McCreevy’s Speech >>

IASB’s Speech >>

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