Making books less binding
Demands for a common accounting language are a boost to new standard-setters, says Roger Trapp
Wednesday 08 February 1995
There is still intense speculation that Sir Bryan accepted the job because of his unhappiness with the direction that Britain's competition policy was taking under Michael Heseltine, president of the Board of Trade. But the IASC is also making a concentrated effort to demonstrate it has a significant part to play in modern business, and so is worthy of a man who has been a member of US and British accounting standards-setting bodies and is a renowned academic in the field.
Indeed, Michael Sharpe, the senior technical partner with the Australian firm Coopers & Lybrand, who is taking over aschairman in May (about the same time Sir Bryan becomes full-time director), suggests the IASC is an organisation whose time is about to come.
According to him, Sir Bryan believes the globalisation of business means the IASC - in conjunction with the International Organisation of Securities Commissions (IOSCO), the international regulating body including representatives of the British Securities and Investments Board and the US Securities and Exchange Commission - will have a similar role in financial services to the General Agreements on Tariffs and Trade elsewhere.
It is a long way from original IASC duties, including setting standards for countries such as Papua New Guinea. That it should be on the point of such a role is a tribute to David Cairns, who completed 10 years as director last December.
More particularly, the IASC is being pulled out of the shadows by the need to establish a means whereby companies produce financial statements that can be understood across the globe. This is partly because companies of all sizes are becoming more international in outlook, but also because businesses in emerging countries, as well as those such as China, that were previously closed are coming to the world's capital markets to seek funds.
Because the main capital markets historically have been in New York and London, companies seeking to finance themselves by this route have tended to adopt either US or UK standards. Though similar in approach, the two codes have notable differences, for example, in the treatment of deferred tax.
However, in recent years, the concept of international ac-counting standards under which countries agree to abide by mutually acceptable principles has grown rapidly. Hong Kong and Malaysia have signed up for it, while such well-known Swiss multinationals as Nestle and Ciba-Geigy are using international standards to compile accounts.
But perhaps the biggest boost to the notion came earlier this decade, when Germany's Daimler-Benz opted for a New York Stock Exchange listing to raise fresh finance. While the strength of German banks and the economy as a whole had meant that a US or UK-style capital market was not required, international observers had always considered the country's accounting to be conservative, with the result that Daimler was allowed to be quoted in the United States. However, when the company duly reported its results under the US Financial Accounting Standards Board's rules, it revealed a different picture to the one previously assumed. The case for a system that allowed comparability and transparency was made.
Building such a system, though, requires - as Mr Sharpe acknowledges - a fundamental change of attitude. "The days have gone when something must be right because someone did it for hundreds of years," he said. The first stage is moving away from concentrating on the accounts preparers' point of view to looking at that of the users, who are, after all, more important.
If one accepts this, it is a small step to realising that it does not matter if a company is a large multinational such as Unilever trading throughout the world or a small company operating within one country. People in other countries may still want to invest in that company. To do so, they should not have to learn a whole new set of rules, says Mr Sharpe.
The problem hitherto has been the United States. Confident of its position as the biggest source of finance, the New York Stock Exchange has been able to force companies such as Daimler to abide by its rules. But the rise of other markets prepared to accept a harmonised international standard - particularly the prospect of China's tens of thousands of companies taking business to Hong Kong - appears to be bringing on a change of mind.
In a recent letter to Mr Sharpe, Dennis Beresford, chairman of FASB, accepts that "the line separating domestic from international activities is not that clear". Therefore, the organisation's obligation to its "domestic constituents" de-mands that an effort be made to narrow the range of differences between US and foreign standards.
The IASC has always insisted that it has not slavishly followed the US, where standard-setters are noted for rigour. It will be up to Sir Bryan and his colleagues to ensure that the growing willingness to harmonise means commitment to the highest standards rather than a readiness to compromise and accept the lowest common denominator.
Customers paying up to £250 more on energy bills than they should every year
Buyers beware of new-build home headaches
Scottish Power hit with sales ban by regulator
Phoenix Life: Chance of a refund for overcharged policyholders has risen
There are 'dark corners' of the investment and pensions industry, says Pension Minister
- 1 What happens to your body when you give up sugar?
- 2 Drugs Live cannabis trial: Hash is less harmful than any other drug, expert claims
- 3 Turkish Airlines flight TK 726 crash-lands on Nepal runway amid dense fog
- 4 Penis size: Study revealing 'what's normal' sends international media into meltdown
- 5 Have sex with your iPad thanks to the new sex toy no-one asked for
Durham Free School: 'Creationism taught at' free school facing closure
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
Ukip would cut billions from Scottish budget to fund English tax cuts
End of the licence fee: BBC to back radical overhaul of how it is funded
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
Boris Nemtsov shot dead: Outspoken Putin critic who had expressed fears for his life is killed near the Kremlin
iJobs Money & Business
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...
£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...
£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...
Day In a Page
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads