| Author (Person) | Chapman, Peter |
|---|---|
| Series Title | European Voice |
| Series Details | Vol.9, No.39, 20.11.03, p33 |
| Publication Date | 20/11/2003 |
| Content Type | News |
|
By Peter Chapman Date: 20/11/03 Sir David Tweedie, the man in charge of creating the next generation of international accounting rules, fears that policymakers could throw away a "once-in-a-lifetime chance" to ensure global business conforms to a single financial language in future. Speaking exclusively to European Voice, the chairman of the London-based International Accounting Standards Board (IASB), also warned of potentially damaging consequences if the European Commission continues to block two controversial standards that caused a political storm in the summer. Tweedie's comments are aimed at preserving the EU's role as the leading sponsor of International Accounting Standards - or "IAS" - after governments pushed through an EU regulation that will force thousands of listed companies to adopt the board's standards in two years' time. EU support for the process has taken a tumble amid a political row over two of the standards (IAS 32 and 39), which lay down a new, harmonized system for companies to ensure that financial instruments, such as derivatives, are fairly valued according to the same parameters. The board says this is necessary to reflect current market realities and provide reliable data for investors in banks or insurance companies. French President Jacques Chirac, alerted by Paris banks, complained that the new standards could deal a huge blow to their solvency as their assets would be downgraded. Chirac declared that it was unacceptable for such power to be wielded by the privately funded IASB. The Frenchman is also unhappy that "Anglo-Saxon" executives dominate the board. The European Commission, which chairs the body responsible for endorsing international standards used in the Union, approved 32 of the existing 34 draft standards - but said the IASB should go back to the drawing board for the two standards that have met resistance. Even Frits Bolkestein, the commissioner responsible for financial services, has publicly warned that more needs to be done to ensure that the IASB's process is more in synch with the EU's needs. But Tweedie hit back, insisting that concerns over the board's management have been overblown, even though the group's trustees, led by US central banker Paul Volcker, have promised to take another look at its constitution. "We do have eight IASB members out of 14 that are citizens of European countries and five that reside full-time in Europe. The other three spend a large portion of their time interacting with European companies and investors," said Tweedie, adding: "The real issue is whether the IASB consults sufficiently with the broad interests at stake - European and otherwise - in order to make an informed judgement." Assuming that is the case, the IASB may still disagree at the end of the day with those who have to implement the standards. "During the past year, we have listened to a broad range of interested parties in Europe, particularly on the issue of financial instruments, and have made significant changes in our proposals when they have eased implementation and been improvements," he said. On the two standards that have raised hackles in France and elsewhere, he said the IASB has made "significant changes" to address many of the problems raised by critics during 18 months of consultation. Aside from one outstanding issue, known in the jargon as "macro-hedging", he claims that the IASB has done its job well - and the time for EU endorsement is nigh. "It is my hope that the Commission will make the collective judgement that we have consulted adequately and that the two standards - IAS 32 and 39 - are of high quality." Without these financial standards, Tweedie warns that "Europe risks leaving derivatives entirely off balance sheet". However, he agrees that scenario is "far too early to contemplate" at the moment. Nevertheless, critics fear it is inevitable that standards unveiled in the future will be watered down if politicians or big businesses raise a red flag, adding that any such dilution could undermine efforts to persuade other countries, such as the US, to take on board the switch to common standards. Tweedie, one of the world's most respected financial experts, played down fears that the recent spat over IAS 32 and 39 could single-handedly thwart the drive for international standards. "I think that it is important to keep the EU endorsement process in perspective the first 32 standards were endorsed unanimously," he pointed out. But he acknowledged that the stakes will be high for the world economy if enthusiasm for "convergence" to IAS is dulled. "I believe that . . . the business community of the world have a once-in-a-lifetime opportunity to establish a global financial reporting system appropriate for the world's increasingly integrating capital markets." He said international standards make it far easier for global investors to compare companies, opening up new investment opportunities across borders. At the same time they remove the differences between national practices that cause enormous costs for multi-national companies when they consolidate their accounts, and improve consistency of audits. "Too much is at stake," added Tweedie, "to allow the global convergence of accounting standards to fail even before it has been achieved." The Chairman of the International Accounting Standards Board, David Tweedie, has warned of damaging consequences if the European Commission continues to block two controversial standards which stipulate a new, harmonised system for companies to ensure that financial instruments, such as derivatives, are fairly valued according to the same parameters. |
|
| Related Links |
|
| Subject Categories | Law |
