Yesterday, the FT reported that the IASB has effectively put a halt (got to pay for access) to fresh implementations of accounting standards currently in the melting pot until 2009.
IFRS implementation is a mess. I warned BASDA members about this in 2004 when it became abundantly clear that Sir David Tweedie was (and remains IMO) out of touch with commercial reality. At the time, the software industry was blissfully unaware of the potential for product re-engineering in a world where ‘fair value’ and not historic cost becomes the order of the day. Tweedie didn’t realise there might be an impact.
I recall several BASDA members being both shocked and angry, especially since it was also clear that German and French governments couldn’t care less about IFRS, being more concerned with reporting under local GAAP for tax purposes. IFRS was, and remains, a movable feast. How do you plan for that?
I tried to lighten up my presentation by referring to the bizarre way German public sewers are valued for accounts purposes, but in reality I was demonstrating horrific complexity. I also questioned how intangibles could be realistically valued (a subject that is now taking on importance in the context of human capital management) and described the now defunct IR39 as completely unworkable, largely because the input factors that can be ascribed to derivative valuations require both pre and post-balance sheet data and event assessment. A tricky one at the best of times and one I saw with the potential for massive fiscal manipulation.
At the time, I said IFRS was reminiscent of the vogue for current cost accounting in the mid-70s when I was studying. What a pile of crap that turned out to be. It seems history can repeat itself.
I’m wholly in favour of transparency in corporate reporting because it holds the promise of level playing fields, regardless of business size. the potential value for SMBs to get a better understanding of competitive information for instance is enormous. I’m in favour of opening up EU capital markets to ensure the money goes to the best deals makers. IFRS is/was a cock-eyed attempt to make this happen.
We now have a period of reflection where some of the inconsistencies can be worked out – assuming IASB is prepared to consider and account for (sic) the practical and political issues at stake.
I sincerely hope that the trudge along the dangerous road towards IASB/US GAAP convergence is halted while the mess gets sorted out because we absolutely must not go down the US rules based road. In my eyes, it is one of the root causes for so many of the US financial scandals and a guaranteed audit cost addition.
What I don’t understand is why Tweedie is still around as IASB chairman when he is either, deaf, dumb or just plain out of touch.
