New IASB Under Sir David Tweedie May Harmonise International Standards

Jason Gorringe, Tax-News.com, London

30 January 2001

Sir David Tweedie, who has just retired as Chairman of the UK's Accounting Standards Board after ten years in which he cajoled and shoved UK accounting into a far more international frame of reference, has now been appointed Chairman of a reconstituted IASB (International Accounting Standards Board) with a mostly full-time team of international finance executives to help him in achieving the target that eluded the old IASB - a global set of accounting standards which are accepted by all the major listing authorities.

Until now, non-US companies wanting to raise capital in US markets have had to re-state their accounts according to US standards, and more generally any international company wanting to have multiple listings has probably had to have multiple sets of accounts as well. Of course this situation is completely illogical, and the more cross-border investment there is, the more illogical it is.

The EU has made considerable progress towards common accounting standards, and the IASB had some partial success in gaining international acceptance of some standards, but on a number of major issues there has been a complete stand-off between the US and IASB, with the EU sometimes making up a third variant.

So why should it be different this time? Well, partly just because the growth of major cross-border investment houses such as the bulge-bracket banks and some of the bigger European and Swiss banks is leading to increasing dissatisfaction with the lack of a common set of rules among powerful financial figures and the investors they represent; and partly because enough work has been done in the foundations of the building to make agreement on the superstructure a possibility, which it never was before. And partly because Sir David, by far the most potent international figure in the accounting world, is out of a job.

It is said that the US and the EU are now both willing to see the process through, and there is a chance that in the next four to five years an internationally-accepted set of standards will emerge. That will be excellent for investment purposes, but what about tax?

A company's accounts, however grand it may be, have two purposes - to inform investors (shareholders) and to provide a statutory basis for taxation (that is, everywhere except in a few no-tax offshore jurisdictions). But for all the effort that has been put into harmonising the presentation of accounts for investors, there is hardly a country in the world where the 'tax computation' is the same as the investors' version. As for comparability of the tax computation between countries, forget about it, except to a limited extent in the EU. Then add in the complications of cross-border taxation, and it becomes impossibly difficult to compare the after-tax results of companies, as opposed to their pre-tax results.

The work of the IASB in reaching a common international basis will be a major step forward, but it will be incomplete until there are also common rules for calculating the tax base. Ideally, it would be the same as the reporting base, but that is just an impossible dream . . .

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