It seems the Financial Reporting Council has gone down under to recruit a
chairman for the Accounting Standards Board, and Ian Mackintosh is its chairman
It’s easy to understand why the FRC has chosen Mackintosh. His background
comprises a nice mix of international experience gained at the World Bank,
regulation from his time as chief accountant of the Australian Securities and
Investments Commission, and a long history of standards setting in Australia and
at the International Accounting Standards Board. But what does Mackintosh gain
from the ASB? Apparently, action. And lots of it.
When it was suggested that all the real work is taking place at the IASB,
Mackintosh replied: “That has to be determined.” He believes this is a pivotal
time for standards setters.
With the convergence programme between the IASB and the US Financial
Accounting Standards Board, and Europe about to move on to international
standards, Mackintosh believes the next two or three years are going to seal the
future shape of financial reporting and standards setting across the globe.
And Mackintosh clearly likes the idea of influencing the decisions. “There
are a lot of questions about the look of financial reporting and how it is going
to work in practice. Obviously, there will be problems that have not been
considered.” Among which is defining the role of the national standards setter
in relation to the IASB. The discussion is ongoing. For instance, the IASB
arranged a meeting of national standards setters at the end of September to see
what they all thought, and the ASB published a consultation document earlier
this year to ask its UK constituency the same question.
“I have a broad view that an IASB cannot work in isolation,” he said. “There
is no way a group of 14 people sitting in one location can understand all the
circumstances of the entire world. There has to be a system for developing
people with technical expertise in standards setting, and that can’t be done in
a global environment. So, yes, there is a strong role for national standards
setters in general. The UK is one of the world’s most important financial
markets, so if there is a role for national standards setters, there has to be a
strong role for UK standards setters,” said Mackintosh.
And maybe that point of view has already started to make an impact. When the
FRC announced that Mackintosh’s predecessor Mary Keegan was off to the Treasury,
it suggested that a part-time appointment might be in order. But that idea was
scrapped even before Mackintosh had talks with the FRC on taking the job. His
contract states that he is on staff full-time for the first two years, with a
review in the summer of 2006.
Even so, early in his tenure he seems well-suited to the role. Senior
standards setters have certain characteristics in common: an ability to
communicate clearly about complex financial reporting issues to laypeople, an
apparent enjoyment of a good intellectual scrap (made even more pleasurable if
they then win it), well-enunciated principles (on financial reporting issues at
least) tinged with a certain realism that sometimes compromises have to be made.
Mackintosh seems to have most of those attributes. For instance, he is clear
on the task ahead for Europe. “The interesting thing for Europe is that once you
have uniform standards, the whole system is only going to work if you have
uniform compliance and enforcement,” he said. “European regulators are doing a
lot of work in that regard, but there is a real challenge in making the system
work. And if it doesn’t work it is like not having uniform standards.”
Speaking before any decision was made at the European level, he was equally
firm on the consequences for Europe if the IASB’s financial instruments standard
– IAS 39 – was not adopted in its entirety. His first plea is that any
compromise allows companies to adopt the standard in full. His second, however,
is more general. “Whatever compromise, the standard is not going to be
compatible with international standards. It will not be comparable with US
standards, and one wonders whether that is going to be acceptable to the US
regulator. This sets a dangerous precedence, and if it is done then it should
not be picked up in other cases.”
Mackintosh knows he has two major items on his plate, both of which have the
potential to turn nasty – the Operating and Financial Review and the insurance
standard. On both of these issues he is understandably diplomatic. But he knows
there are increasing fears that a standard on an OFR may be a step too far and
that while reform for the insurance industry may be a good idea, it is being
pushed through mighty quickly.
The ASB has to produce some tangible results on both of those before the end
of the year. Presumably, that’s enough action for Mackintosh to be going on