IASB Member Slams The Board, Calling it “Unfit for purpose”

A former member of the International Accounting Standards Board (IASB) has criticized the board, calling it “unfit for purpose” after it clashed with its U.S. counterpart over impairment accounting.

Tim Bush, a past member of the board’s Urgent Issues Task Force and a critic of international financial reporting standards (IFRS), contends that IASB’s decision to converge with U.S. GAAP on segment reporting may derail the entire project, Accountancy Age reported.

“The IASB took deeply compromised decisions to adopt faulty standards, IFRS 8, and the deeply discredited incurred loss provisioning model, even the Joint Conceptual Framework. It has been all for nothing. Indeed, states like India are not converging to IFRS precisely due to such faults. The IASB is not fit for purpose,” he said.

The comments came after a tense July 18 meeting, which ended in disagreement between IASB and the Financial Accounting Standards Board (FASB) on accounting for the impairment of financial instruments. FASB said it needed more time for due diligence, while IASB expressed frustration over delays.

IASB chairman Hans Hoogervorst said, “If you go to your constituents with the message, ‘Oh, we’re so unsure, we’re so unsure’ – yes, you’re going to get a lot of additional confusion. I would also like to say that, if this is going to unravel, I find it for us as standard setters … but also for you, I think it is deeply embarrassing that in three efforts, in which we have looked at ten alternatives, in which we have left no stone unturned, we are still not able to come up with an answer after three years. I would find that unacceptable.”

FASB chair Leslie Seidman said the organization is still strongly behind achieving a converged standard with the IASB. A delay would “bring clarity” and lead to “a more efficient process.”

The objective of the project is to create a converged expected loss impairment model that deals with the deterioration of financial assets and liabilities. Critics are saying the “incurred loss” model does not force banks to make adequate provisions for loans that could go bad.

Mark Byatt, director of communications at the IFRS Foundation, which oversees IASB, dismissed suggestions that problems associated with IFRS would derail convergence of global accounting standards. He said IASB welcomes comments on whether IFRS 8 is meeting its original objectives.

“More than two-thirds of the G20 require the use of IFRS and the standards have acquired critical mass as international standards and that is unlikely to change,” he said. “The G20 encouraged us to consider moving from an incurred loss model to an expected loss approach and the boards are three years into a project to consider such a move. We intend to publish further proposals in the fourth quarter of this year.”

The SEC has not set a timetable for making a decision on whether to shift from U.S. GAAP to IFRS.