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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.

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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