12 April 2007

Bruegel paper on ‘Global Accounting Experiment’

Bruegel published a paper on “The Global Accounting Experiment” which presents accounting standard-setting as a “frontier experiment” in international governance, where private initiative can succeed in solving a collective problem that nation-states could not tackle effectively. It argues that to make the adoption of IFRS sustainable, the legitimacy of the IASB has to be bolstered whilst key supporters, such as the European Union, must help consolidate IFRS by implementing them consistently.

Amongst the recommendations given for enhancing the IASB’s legitimacy, the author calls for:

the IASB to make itself accountable by giving a formal role to its stakeholders in its governance;

the IASB to take an uncompromising approach to standards’ quality, if necessary by rescheduling the convergence process with US GAAP;

the US authorities to accept the autonomy of the IASB as a sui generis global institution;

EU institutions to use their influence to lead the IASB towards high-quality standards; and

the investment community to mobilise its financial resources and skills to play a leading role in the standard setting process.

To ensure the consistency of IFRS implementation across borders the author calls for:

the creation of a European Accounting Authority to provide guidance for IFRS implementation and ensure proper European input in the standard-setting process;

the IASB to better monitor local implementation and guidance and exert moral authority to combat inconsistencies;

the accounting profession to sustain a high level of audit quality; and

all market participants to spread accounting culture more widely and bridge the knowledge gap between accounting professionals and other players.

Document

© Bruegel