Accounting fiasco

I don\’t really understand this.

OK, that\’s nothing unusual, there\’s lots I don\’t understand. Especially about accounting for banks.

But the point of a newspaper article is, at least I assume it is, to inform one so that one can understand the point being made.

And that point just isn\’t made. Sure, there\’s lots of \”disaster\” \”OMG!\” and stuff, but the actual point about what was being done wrong doesn\’t come through.

Anyone care to enlighten me?

4 thoughts on “Accounting fiasco”

  1. I don’t think the hack understands it either. Not surprising really; IIRC in “my day” doing the accountancy exams, the auditing and accounting standards exam was a 2 x 3 hour job.

    Essentially, in the good old days, we bean-counters prepared accounts to reflect a pessimistic view of how a business was doing – hence not recognising profit until we were tripping over it, but accounting for losses as soon as they appeared on the horizon; this was the principle of ‘prudence’ which we all knew and loved (not to be confused with a certain previous chancellor’s idea of ‘prudence’, who was more of an STI-riddled one night stand). This change has been going on for some years – it’s not just come about recently.

    The international standards IFRS are being steadily adopted in most parts of the world (I think the yanks were a little more reticent) by being translated into national standards – in the UK, simply “FRS”s, by the Accounting Standards Board. Mr Bush’s complaint is that it’s being done wrong.

    It does seem from reading the article that it’s not the ASB – the “influential watchdog” in the headline – that is giving the warning, but Mr Bush himself. He may have a point as well.

    Not that I’m claiming to be any expert – I deal with smaller businesses who aren’t directly affected by IFRS (yet).

    Oh, and in case you were wondering, there really *is* an “Urgent Issue Task Force” that deals in the dangerous world of accounting standards.

  2. He is giving a personal view, one that some may agree with, but most wouldn’t.

    His doesn’t like the international accounting standards as applied to banks, and his complaint is that in some countries these are only applied to the group accounts, whereas in the UK they apply to all of the subsidiary accounts as well.

    The problem for me is that those who call for “prudence” are really asking for banks to have the right to smooth out their reported profits, and to smother bank accounting so that no one can tell what is going on. This is, to be fair, the approach in parts of continental Europe, and the banks would love it. Doesn’t help the people who accounts are produced for, the shareholders though.

    Note too, at all times the regulators can ask for, and get, information separate from the accounts, so the accounting should not affect the rehulation of banks.

  3. Pingback: no more things falling off trucks! | iFree Talk

Leave a Reply

Your email address will not be published. Required fields are marked *