The FT has reported that the French bank is using a “get out clause… to book losses from Jerome Kerviel’s alleged fraud in its 2007 accounts". The clause is based on the “true and fair” principle. In the UK, this principle has been a major part of financial reporting for decades. In the FT article, an “accounting expert” raises two questions: Is this fair and then, “who is responsible for ensuring enforcement of IFRS in Europe?”. Of course, there is no one body that enforces IFRS. In Europe, an operational group within the Committee of European Securities Regulators checks for consistent application of the international standards. However, like in other regions, it’s up to national regulators to enforce that application. International Accounting Standards Board chairman David Tweedie has gone on the record many times to state that enforcement isn’t, and shouldn’t be, the IASB’s concern. That’s fair enough. But it will be interesting to see if this issue of enforcement gets some air-time in the coming months as we learn more about what happened at SocGen. Picture source
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