IASB's Sir David Tweedie: one chance in a lifetime. (International Standards).

Financial Executive's Managing Editor Ellen M. Heffes and FEI's President and CEO Philip B. Livingston recently questioned IASB Chairman Sir David Tweedie on convergence, accounting standards, corporate governance and more.

Imagine trying to get the major countries of the world to agree on one set of accounting standards--with a deadline of 2005. It's a humongous task--and, you'd think, an impossible dream. Yet, to hear Sir David Tweedie describe it, convergence could be just around the corner. Well, around some corner, some time--and on some items, sooner than on others.

"Let's converge on the major principles," says Tweedie, chairman of the London-based International Accounting Standards Board (IASB). Indeed, he explains, the U.S. standards are also principles-based, but then go into a lot of guidance, or rules; internationally, people don't want to do that. "The idea is, let's say, the answer under international accounting is 70 and under U.S. it's 100; that's not acceptable. But if we got it down to a difference of 98 to 100, well, who cares?" As long as agreement can be on a certain level, he argues, "We are all trying to do the same thing.

"It's a one-chance-in-a-lifetime to get everything together," he says of the current climate. Since he took the chairmanship--coming up on two years now--he says the process is working even better than he thought it would. He uses words like: "spirit of cooperation," "very quick" and "agreement" to describe the progress of his team of IASB-member countries, national standard-setters and other constituents, such as FEI.

The Enron debacle, coming just months after Tweedie's new board got going, "changed the game in the sense that you could see the priorities," and that many of those priorities stem from issues related to corporate governance. He lauds FEI for the job it does on corporate governance. "If you have lazy corporate governance, we can produce rules that are coming out of our ears, and the whole thing will be a mess," says Tweedie, who formerly led the United Kingdom Accounting Standards Board.

The way Tweedie sees convergence really nets down to finding who's got the better answer. It could be the U.S., the U.K, another country or even the IAS (International Accounting Standards). The IASB and FASB staffs are currently working together on a major "short-term project," going through differences in the standards and making recommendations for one or the other to switch to the best solution. Tweedie says this is already done, for example, on discontinuing operations. "We think the U.S. standard [is] an improvement on the one we've got; it is the newer standard, built on the older one, so we're going to switch--and that was done in 20 minutes.

"What we've got to do, argues Tweedie, "is all get together and say, 'We're the CFOs and that's the right way; it's silly having a different rule in the U.K. or Australia or the U.S., when we should just see who's got the better rule and let's do it so that investors worldwide will know what the rules are."'

Key to progress is the relationships with the national standard-setters, which Tweedie says are working well. "FASB is a huge partner," he says, citing the "very good" paper it has prepared on the principles-based versus rules-based accounting and attendant problems. Other national standard-setters are also doing a lot of the early work. The Australians are looking at intangible assets; the Canadians are working on borrowing costs, and New Zealand is working on management discussion and analysis (MD&A).

Have the U.S. accounting scandals had an impact on convergence? Tweedie says a few things that were false came of it. One, the view that the U.S. standards are broken, is not the case at all. When you look at the scandals, he says, "they [individuals] broke the rules," and he believes the problems were really a corporate governance issue. He says that those in the U.K. who believe it couldn't happen there are wrong.

The scandals, he says, "woke up everybody worldwide to corporate governance," and the U.S. has now started asking some interesting questions, which will also drive changes in other countries. It made people realize that lack of confidence in accounting does matter, he asserts, reminding that, after all, it was a lack of confidence that caused the Asian crisis of the late 1990s.

Read the full article at www.fei.org/mag/issues/JanFeb-2003.cfm