Problems with IAS 39 flare up again - 12 Apr 2012 - Accountancy Age

Problems with IAS 39 flare up again - 12 Apr 2012 - Accountancy Age:

"THE DEBATE over accounting standards flared up again this week when investor lobbyists Pirc called on shareholders to vote against the re-appointment of PwC as auditors of Barclays.
But why does Pirc continue to flag up an issue that is being rectified, albeit slowly?"

Here's the background: Pirc is advising its clients to vote against Barclays' annual report, auditors PwC and non-executive/audit committee chair Sir Mike Rake because it believes that flaws in IFRS accounting allow the bank to overstate its profits.

It is not only Barclays and PwC that have drawn Pirc's ire. It will also tell clients to vote against Deloitte and KPMG, the auditors of RBS and HSBC respectively.

Even more provocative is Pirc's claim that "auditors are forcing boards to comply with IFRS, rather than the full scope of the law." In other words, Pirc believes that as the Companies Act calls for a true and fair view of business' financial position, IFRS fails to do so as IAS39 is backward-looking.

Pirc has calculated that the IFRS methodology allows Barclays to overstate it net assets and profits by £6.7bn; HSBC by $16bn (£10bn) and RBS by £16.8bn.

The gripe is not a new one. Pirc has argued for some time that a fundamental problem in IFRS allows banks to pay out on unrealised profits by not forcing them to make adequate provision for loans that could go bad.

Read more: http://www.accountancyage.com/aa/analysis/2167430/ias-flare#ixzz2CIZqTopj
Accountancy Age - Finance, business and accountancy news, features and resources. Claim your free subscription today.
'via Blog this'