I always believed the whole purpose of financial reporting was stewardship: the directors reporting to the shareholders how they had used the assets entrusted to their care.

But according to the International Accounting Standards Board and the Federal Accounting Standards Board that's not true. As the Accounting Standards Board reports, in July 2006 those two bodies said in a paper on the Conceptual Framework for Financial Reporting that the converged framework should specify only one objective of financial reporting, that of resource allocation decision-usefulness.

Now a paper prepared under the 'Proactive Accounting Activities in Europe' (PAAinE) initiative, under which EFRAG and European standard-setters have agreed to pool some of their resources and work together more closely so that Europe as a whole can participate more effectively in the global accounting debate, has begged to differ. The accounting standard-setters of Germany, Denmark, Italy, France and Poland are joint issuers of the paper with EFRAG and the ASB. The paper demonstrates that:

- there is consensus that stewardship/ accountability is a central plank of financial reporting;

- stewardship/accountability is inherently linked to agency theory and is a broader notion than resource allocation decision making as it focuses on both past performance and potential future direction;

- stewardship/accountability is required as a separate objective of financial reporting to ensure that there is appropriate emphasis on company performance as a whole and not just on potential future cash flow; and

- stewardship/accountability has implications for financial reporting which can be demonstrated by way of examples. However, these implications cannot be discussed meaningfully without some references to wider issues including recognition and measurement criteria.

What does this mean? I'd put it simply: it means European accountants reject the US view of accounting that is dominating the IASB right now. And as such they should also reject IFRS 8. That standard is based on the absurd logic that the only use for accounts is to decide whether to buy or ell shares in a company. That's wrong, and that's exactly what this new report shows.

In that case IFRS 8 has no part in the European scheme of reporting.