Some British critics – such as PIRC, the corporate governance adviser – claim IFRS has made accounting less prudent by undermining or even jettisoning the principle that financial statements need to be “true and fair”. This has fostered a culture of box-ticking and enabled banks to lend more aggressively and hand out unmerited dividends and bonuses in the run-up to the financial crisis, they argue.
David Cairns, [an] expert quizzed by the panel [of the Parliamentary Commission on Banking Standards], said there were no significant differences between IFRS and the old UK system for loan-loss provisions. The FRC has also said the “true and fair” requirement is alive and well.
The UK backlash overlaps with a more mainstream critique of both IFRS and US accounting rules. Each requires banks to set aside money for loan losses only when they have demonstrably occurred, a requirement that has been blamed for creating artificially low provisions in good years and heavy losses at times of stress.
Full article (FT subscription required)
© Financial Times
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article