The IASB isn't accountable to anyone

We have, for some time, expressed our frustration with the International Accounting Standards Board (IASB) for its utterly unaccountable nature. This apparently arcane matter is more important than almost anyone recognises - it is the guarantor of much of the opacity in the international economy. (For more on that, follow the links from here or see this Guardian article)

We are not alone in expressing concerns. Wolf Klink, a European lawmaker is quoted by Reuters as saying of the IASB:

"Do we understand how the IASB works... it's a free floating entity not accountable to anyone."

The article is not about country by country reporting (one of our favourite issues) but about fair value or mark-to-market accounting -- but the governance problem at the IASB is essentially the same one. According to Eddy Wymeersch, chairman of the Committee of European Securities Regulators (CESR):

"(IASB Governance) is the cause of everything," Wymeersch told the European Parliament's economic and monetary affairs committee in the latest rebuff to the IASB, which sets accounting rules used in 110 countries, including the EU's 27 member states. . . 'I can remind you the CESR thought it should be in the monitoring group but that did not take place. In my view, this has to be drawn up again and start from scratch,' he said."

As Reuters notes, the G20 has also set a mid-2011 deadline for converging the world's major accounting rules. Convergence, in itself, is a good thing: it's better to have global co-ordination on accounting standards than an international patchwork of different standards, from which mobile capital can pick and choose, creating incentives for a race to the bottom.

But a complete overhaul of the IASB governance structures is essential.