Sanchia Temkin
8 April 2009
Johannesburg — THE world's most famous accountant, Sir David Tweedie, said yesterday that the system of accounting rules for financial instruments was too complex and needed to be addressed urgently.
Tweedie, who is the chairman of the International Accounting Standards Board, said a number of initiatives had been highlighted by the board as cause for concern in light of the global financial crisis.
These included reducing the complexity of financial instruments, off-balance-sheet activity, and exploration for a different provisioning model.
"The G-20 (Group of 20) leaders and other international bodies called on the world's accounting standard setters for a solution to the financial crisis," Tweedie said.
Tweedie is visiting SA this week with 20 international accounting bodies to discuss a solution to the crisis and convergence of international financial reporting standards .
Critics have blamed the accounting standards for worsening the financial crisis.
Tweedie said a common standard on financial instruments, such as leases, would "significantly improve financial reporting and lead to a less complicated approach".
Many of the loans were in fact shown at cost on banks' books .
Showing the changes in values of these securities, even if imperfect, would provide much-needed transparency.
He said that "accounting" could not be blamed for the financial crisis. Accounting was near the bottom of the list of the reasons for the market turmoil.
Tweedie said that the board had set up the financial advisory crisis group to decide on the role that accounting had played in the financial crisis.
Prof Wiseman Nkuhlu is SA's representative on the panel.
Tweedie said that the international accounting board and its US counterpart, the Financial Accounting Standards Board, had agreed to issue proposals to replace accounting standards for financial instruments with a common one this year, rather than the several years it was expected to take.
"However, this was not an easy task as there were areas where the boards might find it difficult to reconcile differences in the existing standards."
Tweedie said he expected 150 countries to adopt international financial reporting standards by 2011.
Among these were the US, Canada, Korea and Japan.
He said the convergence programme with the US was on track.
However, the board was waiting to hear from the US Securities and Exchange Commission to determine whether US companies would have the option to use international financial reporting standards or whether a firm deadline for US adoption would be set.
Tweedie congratulated SA on being the first country to adopt new, less stringent reporting requirements for small and medium-sized entities .
temkins@bdfm.co.za
The International Accounting Standards Board (IASB) is striving to amend accounting standards in light of the financial crisis
The IASB has identified problem areas, among them off-balance-sheet financing, provisioning and the valuation of assets in illiquid markets
A total of 113 countries are using international financial reporting standards
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