Incomparable Accounting Standards

Just a few weeks ago, Jonathan Symonds, FD of AstraZeneca and chairman of the influential Hundred Group of Finance Directors, told the Financial Times that IFRS is making accounts less relevant or comprehensible to investors. Since then we’ve had the ICAEW’s chief executive Eric Anstee issue a call for the UK’s Accounting Standards Board to have a “significant pause” in its programme of trying to converge UK standards towards IFRS. His plea comes as the IASB considers how to devise accounting standards for the smaller and unquoted businesses that aren’t required (or allowed) to use the big boys’ standards.

How different will these standards be? Look at it this way: Anstee also urged the IASB to adopt historic cost accounting as the heart of the new set of standards, not ‘fair values’. That could create a huge difference between the accounts of two otherwise broadly comparable businesses if one is required to use mark-to-market IFRS and the other is entitled to adopt historic cost IFRS. So much for the ideal of a single set of accounting standards throughout Europe.

Subscribers to this magazine should find inside the polythene wrapper our new Financial Director Guide to Global Tax Strategy. The feature in the centre spread reveals how a number of large EU member states – for example, Germany – don’t even allow their non-listed companies to drop local GAAP (the UK is more accommodating in this regard). So much for the ideal of a single set of accounting standards throughout Europe.

Worse, the article shows how even those companies that do use IFRS also have to use local GAAP for tax purposes. This isn’t double-entry accounting; this is actually the old joke about having two sets of books: one for the shareholders and another for the taxman. So much for the ideal of a single set of accounting standards throughout Europe.

Andrew Saweres, editor