The accounting has not been right and now the symptoms for another crisis are there all over again, warns Emile Woolf FCA, as the replacement of IAS 39 with IFRS 9, creates industry wide debate
Arguments over accounting’s role in the 2008 financial crisis persist. Few would go as far as to pin responsibility on the permissive rules of IAS 39, Financial Instruments: Recognition and Measurement, but even their staunchest defender would concede that their labyrinthine intricacy rendered their meaning impenetrable.
Many readers will recall Sir David Tweedie’s quip in 2005, when he chaired the International Accounting Standards Board (IASB): ‘Anyone who claims to understand IAS 39 hasn’t read it properly.’
Yet the IASB has persistently refused to acknowledge that the International Financial Reporting Standards (IFRS) framework, relied upon by banks both before and after the crash, lent legitimacy to the overstatement of profits by marking securities to a bubble market, while under-providing for real losses.
