FT: Accounting watchdog sees trouble

10 November 2004

In an interview with the Financial Times on the harmonization of global accounting rules, Sir David Tweedie, head of the International Accounting Standards Board, said that “there will be blood all over the streets' referring to the expected uproar from companies that might object to the new standards. The changes would involve setting standards for leasing, insurance, performance reporting and pensions, which he said would be tackled in the next three to five years.

A new standard on leasing, for example, could involve companies recognizing leased assets as a liability, which would shift big items such as property and aircraft on to the balance sheet. 'Every company with a big asset is going to erupt,' he said.

The European Union has demanded 'carve-outs' of aspects of accounting for financial instruments, known as IAS 39, over which the IASB has been accused of not listening to European concerns.

Sir David expects a temporary agreement on the use of fair value accounting on liabilities under IAS 39 to be reached during the first quarter of 2005. He could, however, give no deadline for a temporary solution on the more complex carve-out, related to hedge accounting for derivatives.

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