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How To Learn To Love Accounting Standards

Penelope Wise
07 October, 2007

If I mention the dread words 'accounting standards' you will stop reading at once. Nothing comes across as more boring. But you are wrong. Globally harmonized accounting standards are a vital component of a level playing field for investors. And that's the prerequisite for getting rid of all the research analysts, brokers, journalists (yes, end of me, as well), independent financial advisers, hedge fund managers and the rest of the unholy mob that takes such a massive bite out of our savings (see, I survive the chop because I have turned myself back into being an investor).

Once financial instruments (shares and bonds to you and me) are transparent, who needs analysts? In order to be transparent, they have got to be comparable, and that means built on the same structural skeleton. And that means accounting standards.

So the squabble going on between EU and US regulators is much closer to home than you thought. More or less, the UK's IFRS, the brainchild of Saint Andrew Tweedie, is on the side of the angels, and the Americans, who are quite internationalist when they're allowed to be, are tending to agree with him that the very prescriptive GAAP rules should be allowed to wither in the shade of the principles-based IFRS.

Of course, in Brussels this is just another twist of the Anglo-Saxon screw. Once those devilish barbarians at the gate can understand the accounts of European companies, they will be swept away into the arms of the Wall Street investment banks.

Well, not quite, because those self-same banks don't want to own anything nowadays, they just want to securitize it all instead and live off their spreads. And that, translated, means regulatory transparency, so that you and I can see what we're buying.


About the Author

Penelope Wise

Penny Wise but not Pound Foolish! But remember: I am not offering investment advice. My comments are just for your general information; I do not recommend investments, and you should take professional advice before entering any investment contract.


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