The chairman of the International Accounting Standards Board has delivered a scathing assessment of its progress in carrying out urgent reforms, saying repeated delays had shaken people’s faith in the body’s ability to meet deadlines.
Hans Hoogervorst said the slow pace was redolent of “dysfunctional working processes and dysfunctional decision-making”. He added: “We have broken deadlines so often that nobody believes in them any more.”
The IASB sets the International Financial Reporting Standards followed by listed companies in the European Union, Canada, Brazil, Australia and other countries.
It is running more than two years late in finalising reforms aimed at improving corporate reporting in the wake of the financial crisis, including a crucial rewrite of rules governing the way banks account for bad loans.
The “dysfunction” criticised by Mr Hoogervorst was in part a reference to the IASB’s decade-long attempt at harmonising rules with its US counterpart, the Financial Accounting Standards Board.
This was designed to transform IFRS and US Generally Accepted Accounting Principles into a global accounting language. US enthusiasm for the decade-long “convergence” project has faded, but the embers of the ambitious collaboration between the two boards still complicate IASB attempts to finish outstanding projects.
Mr Hoogervorst – who inherited the unfinished reforms and has signalled an end to preoccupation with the US – also believes the board needs to do better research before launching projects. The IASB had also faced external pressure not to rush changes.
The former Dutch finance minister made his candid comments during an IASB board meeting as he put forward plans for a revision of the general thinking that underpins its work, known as its “conceptual framework”.
“Everybody who talks about the conceptual framework expects us to take at least 10-20 years to finish it,” he said, before defiantly setting a deadline of September 2015 instead.
Europe is putting pressure on the IASB to complete reforms and the convergence project, despite the lack of enthusiasm on the US side. The European Commission on Thursday said 2013 was “the year of truth” for the globalisation of accounting standards after “missed opportunities” in 2011 and 2012.
“At EU level, some stakeholders have the distinct impression that we are going backwards,” said Olivier Guersent, head of the cabinet of Michel Barnier, the EU commissioner in charge of accounting issues.
Frustrated with the US’s reluctance to adopt IFRS, Brussels has raised the prospect of the chairman of the US Securities and Exchange Commission being ejected from the monitoring board that oversees the IASB.
However, Peter Walton, an accounting professor at France’s Essec business school, said: “It is clear that appetite in the US to adopt IFRS has largely evaporated.”
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