Mario Christodoulou, Accountancy Age, Thursday 19 August 2010 at 09:51:00

Chairman accused of "extrodinary" claims in letter to Financial Times

The International Accounting Standards Board (IASB) chairman has been lambasted by a Bournemouth University Professor who claims the ?the taxpayer and the shareholders picked up the price of the IASB?s reckless accounting model?.

Professor Stella Fearnley has used a letter in the Financial Times to attack IASB chairman, Sir David Tweedie, and the accounting standards contributed to the crisis.

Fearnley, who was responding to a previous story, takes aim at the IASB?s new impairment proposals, which proposes an expected-loss model of loan provisioning.

?Sir David refers to moving from an incurred loss model for loan loss provisioning (providing only against cases that have already defaulted) to expected loss (prudently providing against the inherent risk in the loan portfolio), and suggests that expected loss provisioning is not the job of accounting but of regulators,? she said.

?This is extraordinary, as expected loss used to be normal prudent practice before the IASB did away with the principle of prudence.

She also criticises the IASB?s convergence project, which aims to harmonise significant US and International accounting rules by June 2011.

?I cannot understand why anyone would wish to converge with a US accounting model that has both spawned and exported two major financial crises in the space of eight years,? she said.

Further reading:

Move to converge just exported crisis

Tweedie faces greatest challenge in last days