Select Committee on Treasury Minutes of Evidence


Examination of Witness (Questions 327-339)

PROFESSOR SIR DAVID TWEEDIE

TUESDAY 2 JULY 2002

Chairman

  327. Welcome to the Committee this morning. Thank you very much for attending. Could you introduce yourself, please?
  (Professor Sir David Tweedie) David Tweedie, Chairman of the International Accounting Standards Board.

  328. What is the function of your Board? How does that fit in with the Accounting Standards Board?
  (Professor Sir David Tweedie) We have been going for a year and the function of the Board has been to set up one single set of accepted global standards. Our job really is to pull the various national standards together into one agreed international set and that is why we work with the national standards boards such as Mary's ASB to try to find who has the best answer and then that becomes the international standard. That is the intention.

Mr Plaskitt

  329. Can you tell us who funds your Board?
  (Professor Sir David Tweedie) It is funded by central banks, by major accounting firms, by financial institutions, companies. This was set up in the strategy committee. We had to get started quickly and the trustees were told to go out and try to source cash from these various companies or institutions up to a certain limit: $200,000 was the limit from companies or institutions; $1 million from accounting firms; from banks it was $50,000.

  330. Could you clarify what proportion of your funds comes from accounting firms?
  (Professor Sir David Tweedie) About one quarter.

  331. What proportion comes from other industry sources?
  (Professor Sir David Tweedie) Most of the rest of it.

  332. Are you satisfied that given that source of funding you are sufficiently independent from the accountancy business to be setting its rules?
  (Professor Sir David Tweedie) We are independent in that the Board itself does nothing about the funding, that is for the trustees; they have no say in the technical side and we have no say in the financial side. Ideally the best way of funding us, I suspect, would be to put a levy on registrations around the world. That would be the easy way to do it but that would take some time to organise and we did not have that time at our disposal.

  333. Are you putting that up as a recommendation? Would you prefer to be funded that way?
  (Professor Sir David Tweedie) I think the trustees would prefer it that way. It is not very nice going around asking people for money; they would much prefer it that way. If we do something which is not popular—and we are going to—people may decide they do not like to fund us and drop off the cash. There is always a danger in that situation.

  334. Are you suggesting you prefer that because it is more comfortable rather than that it is more clean, if you like?
  (Professor Sir David Tweedie) It is clean and you do not have this threat of withdrawal of cash.

  335. Do you not think the way you are funded is an issue of guaranteeing your independence?
  (Professor Sir David Tweedie) I feel pretty independent, but nonetheless, this is an even better way, a more obvious way of doing it, if you do it through the stock exchanges.

Chairman

  336. Have you ever experienced a threat of withdrawal of cash?
  (Professor Sir David Tweedie) Yes.

  337. Can you give us as much information as possible on that?
  (Professor Sir David Tweedie) Certainly. It happened in the United States in October when we told them what we might be doing on accounting for share options. American industrialists told us quite bluntly that they had spent $70 million lobbying Congress to stop the American standard and that they would do the same with us, therefore they threatened to withdraw cash and perhaps destroy the organisation.

  338. That is a sober note on which to start our questioning.
  (Professor Sir David Tweedie) Yes, it is, is it not?

Mr Mudie

  339. What was the issue they objected to?
  (Professor Sir David Tweedie) Accounting for share options. The Board has tentatively decided that share options certainly have a value and they should be charged in the accounts. In America you disclose it, because Congress threatened to put a Bill through to stop the American standard setter charging, which was what they wanted to do. If that had gone through, American profits would have dropped by eight per cent; in the high tech industries probably about 50 per cent.


 
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