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January 18, 2011

HoL enquiry questions value of IFRS

Global accounting standards are unnecessary
and IFRS rules must not take precedence over a true and fair view
on accounts, Institute of Economic Affairs chairman David Myddelton
told the UK House of Lords economics affairs committee
yesterday.

International Accounting Standards Board
(IASB) member Steve Cooper dismissed Myddelton’s views and said
that prior to IFRS, accounts lacked transparency on a global scale,
making it difficult for investors to compare companies from
different countries.

“I don’t think true and fair value is
endangered with IFRSs,” Cooper said.

He added that IFRS does not merely encourage
box-ticking but instead enables accountants to work towards true
and fair view on accounts.

But according to Myddelton, having a single
set of accounting standards is making it easier for governments to
interfere, stressing that one set of standards can lead to systemic
risk.

The Lords committee expressed concern over the
US adoption of IFRS, but were told by Cooper that there will be a
decision by the US Securities and Exchange Commission, towards the
end of the year by which time some companies may be allowed to use
the standard.

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The HoL committee is primarily interested in
audit market contrition; but have taken a detailed look at the
financial crisis, reviewing all the factors involved in the audit
of banks and large listed companies.

Over the past three months the committee has
heard the opinion of several witnesses, including academics, who
say IFRS involves a large amount of box-ticking. But the investment
community, large companies as well as the accountancy firms have
all expressed support towards a global set of accounting
standards.

After hearing the views on IFRS the audit
committee heard from several more witnesses and is expected to hear
from banks in the coming weeks as part of the ongoing UK House of
Lords enquiry.

 

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