Politicisation of Accounting Standards

The article in the title reports the Association of British Insurers bemoaning the EU's refusal to endorse IFRS 9 'Financial Instruments'. ABI spokesperson, Paul Vipond, regrets the 'politicisation' of accounting standards.

Is politicisation such a bad thing? Standard setters are in business making rules about how companies keep score. These rules can have real economic effects that make some people better off and some people worse off. For example, many people hold the pensions standards partly to blame for the demise of final salary pension schemes. Now, this kind of decision about wealth transfers is quite rightly in the political domain - our elected representatives should be the people making these decisions, not a private and largely self perpetuating organisation, such as the IASB.

The IASB likes to pretend that its work is purely technical and that it is devoted to improving the way that financial statements 'tell things as they are' so that decision makers are more fully informed. By denying that accounting standards involve choices that affect individuals and companies, the IASB attempts to avert criticism about its legitimacy.

If IASB were doing its job properly it would be looking at the likely economic and social impact of its standards.