Accounts of battle divide protagonists

AS BATTLES of words go, it is not that violent. The two protagonists - both Scots - claim to be chums with a shared love of under-performing football teams. And yet for much of the past decade Sir David Tweedie, chairman of the Accounting Standards Board, and Ron Paterson, senior technical partner at the accountancy firm Ernst & Young, have been sniping at each other.

To the outsider, the debate that has erupted again with the publication of the ASB's latest draft statement of principles looks somewhat arid. The two disagree on the accountancy treatment of assets and liabilities. In fact, though, as one seasoned observer has said, "this is fairly fundamental". Sir David believes that informing investors of what is really going on requires reporting assets and liabilities in accounts so that they reflect transactions, while Mr Paterson takes what is commonly termed a prudent approach and advocates matching by means of provisions, with the intention of smoothing results out over the years.

The problem for Mr Paterson is that Sir David came into his post on a reforming ticket. The ASB was launched in 1990 because its predecessor, the Accounting Standards Committee, was felt to have been undermined by all the financial engineering that contributed to the spectacular collapses at the end of the 1980s. Moreover, the chairman has a better way with words than most accountants - he terms those who want to put money aside in case they decide to carry out a restructuring advocates of "psychoanalytical accounting" - and his pronouncements tend to have the ring of common-sense to them. Accordingly, most leading accounting firms have fallen into line.

However, when the first attempt at a draft statement of principles was published three years ago, it was not only Mr Paterson and his colleagues at Ernst & Young who were upset. The draft issued in November 1995 attracted more letters of comment than any other document the ASB has published.

Although it has been three years coming, the latest version is really a clarification exercise. To aid with this, the ASB has brought out a question and answer booklet. Predictably, Mr Paterson is not impressed. "It looks like the other stuff twiddled around a bit," he said last week, adding that it was "an odd mixture" of self-evident truths and obscure arguments.

However, he seems to have lost some of his enthusiasm for the fight. While describing the explanatory booklet as "disingenuous," he conceded that the package had been "cleverly put together".

It is tempting to see this as a irrelevant skirmish that has livened up the UK accounting scene. After all, both parties will soon be departing the main stage - Sir David because his 10-year term has only a few months to go and Mr Paterson because in the summer he is leaving E&Y for a quieter life, although he insists he will still be firing in "abusive remarks".

But in fact the debate is central to the increasing pressure for international harmonisation of accounting standards. The ASB says its draft statement of principles is based on the International Accounting Standards Committee's framework and that in turn is based on the concepts that started to be introduced by the US Financial Accounting Standards Board two decades ago. Accordingly, suggests the ASB, the principles are not representative of some way-out view but are being used by leading financial reporting standard-setters around the world.

As far as Sir David is concerned, this is hardly surprising. "The principles have proved an effective means of restoring sound accounting practice by stamping out the appalling abuses of the 1980s. The dog-eared accounting concepts used in the 1980s were simply not up to the task of dealing with the transactions of the late 20th century and had to be replaced - there replacement is the Statement of Principles."

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral