When asked why academia was so venomous, Dr Henry Kissinger replied “because the stakes are so low”. Accounting has the same capacity to set specialists at each others’ throats but is critically important for capital markets. That combination could leave investors stuck with second-best for some time.

International Financial Reporting Standards are now the world’s dominant regime, used in more than 90 countries across Europe, the former Soviet Union, Africa, the Middle East and Australasia. China, Japan and Canada will converge. Judged on the test of global adoption, IFRS have been a triumph.

The rules are only an improvement for some. Spain, for example, did not previously require a cash flow statement. For those with strong former regimes, such as the UK, IFRS have made accounts less user-friendly, while yielding little new information.

How can standard-setters improve IFRS? Companies mainly, irrationally, rage about the use of third-party “fair values” in their balance sheets. Investors have two other priorities.

First, IFRS cash flow statements do not reconcile cash flow to either operating profit or net debt. One big UK company says its net debt is only calculable with reference to three footnotes in its accounts. The main aim of cash flow statements is to test whether claimed profits really exist. IFRS actually make this quite tricky.

Second, IFRS must prescribe more clearly the presentation of the profit and loss account. Today, operating profit can, ludicrously, either include or exclude pension fund returns. And there is no clear identification of asset value changes in the P&L. This was to prevent recurrent “one-off” items but, in practice, is confusing.

The International Accounting Standards Board wants to address these simple faults. But getting its members’ consent, while keeping America’s archaic rule setters informed, usually takes three years. That is a shame. IFRS are now the world’s benchmark, but they risk remaining a flawed common denominator.

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