Mario Christodoulou, Accountancy Age, Friday 7 May 2010 at 12:52:00

ASB chairman writes to IASB chief on new standards


The Accounting Standards Board has voiced concerns about emerging rules covering derecognition, amid concerns new standards could encourage ?financial structuring? opportunities.

In a letter, addressed to International Accounting Standards Board (IASB) chairman, Sir David Tweedie, the ASB said it had ?significant concerns about the direction of travel? on the derecognition project.

Derecognition is a collection of accounting rules that outline when companies can ?derecognise? items from their balance sheets. Since the Enron scandal there has been great demand to keep as much on company balance sheets as possible, to deter companies from trying to hide assets and their corresponding risks.

The debate was revived following March's Valukas reports which claimed collapsed US bank Lehman Brothers had removed items from their balance sheet using repurchase agreements.

In the letter, ASB chairman Ian Mackintosh, said the rules is inconsitant with current accounting principles.

?The IASB?s proposed model is likely to fundamentally change the ?landscape? for reporting of financial assets under IFRS, with a different picture of the balance sheet than that presented currently,? he said.

?We believe this will lead to inconsistent and counterintuitive results as well as increasing structuring possibilities.?

The IASB?s project is still being developed and includes an exemption for the repurchase agreements mentioned in the Valukas report. The body is continuing to discuss the standard and has arrived at no firm conclusions.

Futher reading: ASB website

Lehman smoking gun leaves E&Y facing questions