IFRS 8 – the EU still has not approved it

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After a week away, and off the web, it's amazing to come back to good news.

There's none better than the decision of the European Parliament's Economic and Monetary Affairs Committee to defer approval of IFRS 8, again. Only Accountancy Age has reported this, but it was on the Committee's agenda for 22 October, as a matter already deferred for consideration from the meeting a fortnight earlier.

Accountancy Age reports that more deliberation is still required and that the IASB needs to undertake more impact assessments on the proposed standard, which deals with segment reporting. The rejection is unsurprising. The report commissioned from Nicolas Veron by the Committee on adoption said:

The Commission's Report on IFRS 8 does not provide an adequate basis for informed decision, due to severe methodological flaws and insufficient disclosure of feedback received by the Commission during the consultation phase. The current process which may lead to IFRS recognition in the United States does not provide a convincing argument to adopt IFRS 8 in view of the standard's shortcomings. To defend the objective of high-quality standards, the European Union should not adopt the current version of IFRS 8.

It's hard to see how that report could have said more bluntly that the proposed standard was not fit for purpose and the European Commission's approval of it for adoption was rigged because it ignored the submissions made.

New IASB Trustee chair Gerrit Zalm could at the same time have done nothing to help his cause by making clear that Europe must adopt the rulings of the IASB without seeking amendment. As I have said:

A private company registered in the tax haven of Delaware, which is what the International Accounting Standards Board is has no right to threaten the countries of Europe about their rights to create the laws they want.

The current rejection of IFRS 8 could have been predicted from the moment he made such comments, and I suspect that chance of its adoption has now receded enormously.

But that's the politics of this. Let's come down to the important issue. IFRS 8 set out to do three things. The first is to provide less information to users of company accounts. The second is to deny that companies have a duty to report where they are and what they're doing there. The third is to ensure that both investors and civil society are denied the information they need to assess risk, and tax risk in particular, in individual locations, although that information is critical to long term decision making.

The profession and the largest companies in the world promote this process of denial. In doing so they seek to harm accountability. Investors and civil society, who are those for whom accounts are prepared, want the information the IASB seeks to deny to them. The battle line is blunt, harsh and real. It's about whether companies are run for the best interests of their managements alone, who greatly enrich themselves as a result, or whether they are to be run for the benefit of society at large.

The European Parliament has rumbled the profession on this one - a profession that is, at its highest levels, enriching itself as part of this process of denying the responsibility it has to people at large. And they're listening to the combined voices of investors and civil society who are saying we have a right to information on segment reporting, for which I have long argued.

Over the summer I was unsure whether we'd win this argument. But I think the IASB cause is now seriously harmed by its own actions, and by that of FASB, who in May reported that the US equivalent of IFRS 8 was flawed, but then appears to have denied that fact by suppressing its planned review of its standard to allow IFRS 8 an easy ride in Europe. Now I think that intellectual weakness of the IASB's claims are becoming very apparent and the credibility of the alternatives, including that I have promoted, are clear. This campaign can still be won. It will be an astonishing day for accountancy if it is. It will be an even better day for accountability.

I haven't got the champagne on ice. But I'm mighty pleased that the IASB is in effect being told to go away and act in the public interest. Because that will be a first if it comes to pass.