Examination of Witness (Questions 327-339)|
TUESDAY 2 JULY 2002
327. Welcome to the Committee this morning.
Thank you very much for attending. Could you introduce yourself,
(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.
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
(Professor Sir David Tweedie) Most of the rest of
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
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 popularand we are going topeople
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
(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.
336. Have you ever experienced a threat of withdrawal
(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
(Professor Sir David Tweedie) Yes, it is, is it not?
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.