Tweedie demands decision on international standards

Finance directors of UK companies must decide now whether they want to adopt international accounting standards or go it alone, claims Sir David Tweedie.

The Accounting Standards Board chairman fired the stark warning to over 100 leading UK FDs at Coopers & Lybrand’s Future Direction of Accounting conference last Thursday – the day before the International Accounting Standards Committee issued its revised standard on taxes and an exposure draft on pensions. Both are at odds with current UK practice.

Tweedie, and leading standard setters Sir Bryan Carsberg, secretary-general of the IASC, and Jim Leisenring of the US Financial Accounting Standards Board, revealed their hopes for future global standards.

Tweedie said domestic abuses of the 1980s had been stamped out. The ASB’s job now is to adopt international standards and lead ‘where appropriate’.

‘Are we going to be little Englanders maintaining our independence and making accounting reconciliations to agree with international standards?’

The alternatives, suggested Tweedie, are total convergence or compromise.

He warned that the IASC’s latest rulings would mean ‘sacrifice and change’ for UK companies. The International Standard demands full provisioning on taxes and has banned partial provisioning , which is allowed in the UK.

On pensions, the IASC proposes a risk-free discount rate to value pension liabilities, compared to the UK’s actuarial basis. Accounting for goodwill and derivatives are other big issues central to the current debate.

Tweedie claimed many multinationals’ desire to maintain independence could force separation from the international mainstream with detriment to the reputation of UK accounts and the cost of UK capital.

Leisenring, who said international standards must be ‘robust’ and concept-based, added: ‘We must explain the importance of financial reports in the capital allocation process, as bad standards can raise the cost of capital. We must realise accounting changes economic behaviour. We must better articulate the underlying concepts of our standards and try to avoid the myriad of exceptions we have come to expect.’

Carsberg, who highlighted changes to the IASC designed to improve decision making, stressed the importance of standard setting bodies working together.

He said: ‘It’s not my ambition to go it alone from national standard setters.

Our relationship is cooperative.’

He added that the IASC planned to introduce a system to root out ‘aggressive interpretations’ of international standards at national level.