Accounting isn’t a topic of wide general interest. Nonetheless, accounting professor Prem Sikka’s CIF piece on the International Accounting Standards Board is one of the more bizarre and surreal things that I’ve ever read.
The point of International Accounting Standards is to ensure comparability of accounts of companies that report their financial results in different geographies – so that you can be sure a company reporting €500,000 of profit before tax in Spain has actually generated the same returns as a company reporting the same figure in France.
The IASB’s role is to set these standards. Broadly, it does so by taking national Generally Accepted Accounting Principles (GAAP) from across the world and to try and come up with acceptable ways of making them compatible.
Now, national GAAP is generally determined by a local industry body – in the UK, the accounting standards board. These are made up of accountants, unsurprisingly, and are usually funded by a levy on companies. This has broadly worked (yes, there’s been the occasional corporate disaster – but in nearly all cases, the company in question has deliberately broken the accounting rules in a way that audits have failed to detect, rather than publishing accounts that follow them).
You might, therefore, not be especially surprised to hear that IASB is run on a similar basis: trustees drawn from the Great and the Good of the global accounting profession (senior partners, academics, businesspeople with accounting backgrounds) appoint a board drawn from the Pretty Great And Good But Not Quite So Important of the global accounting profession.
You might, however, be slightly suprised to hear that Dr Sikka believes this is a terrible thing:
the IASB is not accountable to democratically-elected parliaments. Its members are not elected by stakeholders or any representative organisations. Neither is their suitability scrutinised by parliamentary committees.
Yes, what we really need in order to ensure the international comparability of financial statements is for every standard to be approved by a committee of MPs (nearly all of whom don’t have a financial background) in every single country of the world. That would be workable.
However, what really upsets Dr Sikka is that not only do investors want to see consistency between accounts across different countries in the developed world, they also feel that this ought to encompass the developing world. Some people even go as far as to suggest that imposing consistent accounting standards might reduce the incidence of corruption in the developing world, what with ‘bribes paid’ not being a recognised income statement entry under IAS and all…
This is part of new colonialism and ideological domination. Such imposition makes developing countries dependent on the west and prevents them from developing appropriate local institutional structures.
The only spin I can put on ‘appropriate local institutional structures’ that makes any sense whatsoever here is ‘allowing dodgy practices’. Seriously – I can’t think of a single way in which a developing economy would lose by adopting IAS compared with local standards, aside from short-term costs of transition. And nor does Dr Sikka cite one [*].
There are reasons why, and ways in which, it would be good to impose corporate social responsibility standards internationally. But that has absolutely nothing to do with the imposition of financial statements, any more than the technical standards behind DVDs impact on film criticism…
[*] some commenters mention ‘transfer pricing’ – e.g. manufacturing goods in a high-tax country and selling them at an artificially low price (generating an artificially low local profit) to a subsidiary in the low-tax country where you retail them. But IAS says you shouldn’t do that, and in any case tax accounts are separate from financial accounts – they are subject to tax agency rules, not accounting standards.
From the BBC website’s article on this year’s A-level results (yes, I know – we’re always first with the news here):
Twin sisters Tania and Mahua Bhaduri from West Malling, Kent, both got five grade As. But unlike her sister, Tania has not got a university place.
Their father, Dr Bim Bhaduri, said his daughter Tania… had been rejected from universities including Oxford, Bristol and Sheffield.
But Mahua, who studied almost the same A-levels as her sister at state foundation school Tonbridge Grammar for Girls – but took geography instead of psychology, has earned a place at Imperial College, London.
Dr Bhaduri added: “The system really is a lottery, they can’t differentiate between bright and brighter and this is a problem.
No: this is a sign of the system working admirably. One of your daughters took a subject which is not especially popular or fashionable at a university where it is not a specialist subject (to be honest, I was surprised to discover Imperial even offered geography); the other applied for a subject which is highly fashionable at prestigious institutions where the course is particularly respected.
(and Sheffield, which probably rejected her for also applying to Oxford and Bristol…)
I’ve got a new piece on the Sharpener, which I appear to have annexed (if anyone, especially Sharpener contributors, fancies contributing to the Sharpener, then by all means go ahead).
It’s about the latest bizarre Youth Gone Feral moral panic, and how we really shouldn’t worry about That Sort Of Thing. Also, if anyone tries to ban me from drinking wine in Regent’s Park, I’ll set them on fire. Not that there’s been all that much wine-drinking opportunity in Regent’s Park this summer, of course.
My main alternative recreational pursuit this summer has been going to weddings. I’m becoming convinced that most of my friends have decided to get married this summer purely to spite me, since it’s the first summer since 2001 that I’ve spent single. The obvious rejoinder is that I should look for prospective partners at said weddings – the problem there is that nearly everyone I’ve encountered there seems to be either married, engaged, over 60 or under 14. And not interested. Oh well, two more to go, only one of which is going to actually have my ex attending it.
That’s your lot; I’m off to drink wine outside the Tube station until feral youths shank me or Peter Fahy arrests me, whichever happens second…
From the Observer:
Of 377 National Health Service and private hospitals surveyed in England, 173 – 46 per cent – were found to have poor cleanliness in their kitchens, or canteens or cafes used by staff, patients and visitors. Nine of the 377 were private hospitals, of which six were found to have at least one area of concern.
So, 46% of NHS hospitals had food cleanliness problems, while 67% of private hospitals had the same problems? That’s +1 for the NHS, I reckon (not quite sure why Wat thinks otherwise.)
More importantly, the whole story is massively overblown. Only eight of the 377 hospitals inspected were found by health inspectors to have sufficiently serious problems to go onto a six-month inspection schedule – i.e. had real problems that might get them closed down if not addressed, rather than ticking the wrong boxes to meet vaguely nannyish rules. That’s a hell of a lot better than you’d get if you inspected 377 randomly selected food establishments…
From a piece on feminist attitudes to pornography:
Also, we always tend to worry about blue-collar dudes knocking one off over Zoo in factory toilets. What about the way people like Sade might be taught in lecture theatres, for instance?
To my shame, my first thoughts on reading this paragraph were: 1) how the hell is 1980s soul singer Sade pornographic? 2) why the hell is 1980s soul singer Sade being taught in lecture theatres?
A recommendation to people writing about the notorious French pervert in future: say ‘de Sade’, or horrible Smooth Operator-ish connotations may arise in your readers minds. After all, would you call France’s leading fascist ‘Pen’, or the Netherlands’ maddest painter ‘Gogh’?
Do you remember the Terrible Story of Lawless British Youth from last year, of the Evil Callous Teens who squished bowling alley technician Ferdinand Dela Cruz to death by chucking a ball at the machine he was working on, triggering the mechanism?
Some months later following an inquest, it turns out that the poor bloke actually forgot to unplug the machine before climbing inside, and that the mechanism was triggered by his weight.
I say “following an inquest”; what really I mean is “following ten seconds’ thought, or one phone call if ten seconds’ thought is beyond you”. Having worked on projects in bowling alleys (it’s a glamorous life in retail and leisure consulting – oh yeah!), it’s obvious that the “kids lob ball at worker” story was rubbish.
For a start, there are moveable bars across the lane at all bowling alleys that sweep up balls, protect the machinery from errant balls – and protect workers from errant balls. If you ever see an out-of-commission bowling machine, it’ll have the bar across it.
Another point is that the machines at bowling alleys, as Mr Dela Cruz tragically found out, are weight-sensitive. And people weigh more than bowling balls. So unplugging them before any maintenance is carried out is pretty essential.
Finally, let’s assume it were possible to adjust some of the machinery while it was switched on without treading (or even risking treading on) the weight-sensitive parts. Considering the publicly accessible nature of bowling alleys, the risk of some accidental/illicit ball-throwing is so obvious that the procedure would be banned under health and safety rules anyway.
I know this – and so does anyone else with the slightest idea of the way bowling alleys work. Which means that the Sunday Mirror, the Manchester Evening News, the Evening Standard and Sky News all failed to phone anyone with the slightest idea of how bowling alleys worked before filing the story.
Good work, fine gentlemen of the press.
As part of a mildly annoying meme, Larry Teabag has asked me to list eight facts about myself:
1) I once failed to eat a kilo of corned beef for a bet, coming in with a time of 65 seconds;
2) I’m the sixth person in my immediate family to be called ‘John Oliver Band’, and the third surviving person. But I was first to the domain name and the gmail account (and hence also occasional letters from bemused Older Persons);
3) I’ve been interviewed by Radio 4 as an expert on Wimpy Bars and quoted in the Economist as an expert on Islamist cola;
4) The worst job I ever had was door-to-door salesman for a semi-fraudulent sticky paint company;
5) I accidentally ran into Richard E Grant when leaving a library, but was too surprised to come up with an amusing quote;
6) I’m the only person I know to have heckled a professional comedian by email (Richard Herring, since you ask);
8) Just because I’m interested in transport policy, doesn’t make me a trainspotter (and I’ll beat you up with my thermos flask and throttle you with my anorak if you disagree).
Speaking of Internet memes: best lolcat ever.
Everyone rants all the time about the Tube being rubbish. It’s practically a qualification for living in London, with instant deportation as a punishment for those who fail to join in. Which is fine: there are problems with the Tube, and it’s not as good as the public transport systems in East Asia (although I’d actually rate it at least as good as any public transport network I’ve visited in Europe or the US).
The thing which really annoys me, though, is when people blame Ken Livingstone, Tim O’Toole, Metronet or Tubelines for the system failures.
Between 1945 and 2000, with the exception of the absolutely-necessary-to-avoid-gridlock Victoria Line, the half-arsed-compromise Jubilee Line, and the Thatcher’s-Docklands-project-must-succeed Jubilee extension, there was no investment in the Underground system. None.
Central government skimped on the money for essential maintenance, and didn’t make any money available for capital projects such as major line or signalling upgrades. London was a declining city and the train was a declining transport mode – cars and suburbs were the way forward.
So anyone who blames the people in charge of the Tube for its state today is simply wrong. Ken, the current government, LUL’s current management and the infracos are the first people since the days of the London Passenger Transport Board in the 1930s to embark on a serious programme of upgrades to the underground. This isn’t necessarily because they’re all wonderful people, just that people have suddenly noticed that London is growing again and the private car is not a viable means of transport within London.
Yes, it gets frustrating when there are signal failures because 30, 50 or 80 year old kit doesn’t work very well. It’s also frustrating when there are signal failures or lift failures or train failures because brand new kit hasn’t bedded in yet [*]. But there’s a generally
understood curve over time in reliability of major capital assets – it doesn’t work very well when brand new, works quite well for some time after that, and then doesn’t work very well again because it’s too old. And at the moment, most of the kit on the Tube is either brand new, being replaced, or very old and knackered…
Hopefully, Ken’s Tory rival at the next Mayoral election will also be aware of the glaring reality that continued investment in London’s transport system is absolutely vital – although given their previous choices of a perjurer and a road-builder, I’ve got to admit I’m sceptical. But either way, anyone who refuses to vote Ken because they think he isn’t doing a good job on London’s transport is an idiot (of course, if they refuse to vote Ken because they don’t agree with his politics in other areas, then that’s a different story).
[*] or because a new high-speed train control system makes the trains accelerate so fast that the motors fall off, as with Automatic Train Operation on the Central line.
It’s not especially surprising to see a BBC article that looks at the start of a potential major positive in a country’s economic position, and then gets the consequences utterly wrong (this isn’t particularly having a go at the BBC for being leftie – the Times, Telegraph and Daily Wail are equally economically illiterate at times). This particular piece is on the introduction of supermarkets into India, and especially the associated Risks and Catastrophes.
Now, while gibbering loons and farmers everywhere bemoan and bewail the presence of supermarkets in the west, it’s clear that they’ve massively improved the quality and availability of food. Even if you’re very poor indeed in the UK, you can afford to eat well as long as you live within reach of a supermarket, even quite a crap one.
In the UK prior to supermarkets, people paid a great deal to buy food from local grocers, a few of whom are nostalgically remembered as good, while most were somewhere between mediocre and downright crooked. The supermarkets were a boon primarily to the poor, and shopping at farmers’ markets today is a badge of upper-middle-class pretension. The local shops have either turned into bastions of poshness or closed down, and good riddance.
I think this is the kind of narrative that charity worker Indu Singh is thinking of in India: “We have already seen that in places where these supermarkets are coming up, local vendors are losing 40% of their business. What we are seeing is a big divide being created, between the super elite and the poor.”
But the Indian supermarkets are the opposite of UK supermarkets: they are more expensive than the street markets for basic produce. So the only people who go there are people who are rich enough for the price differential not to matter. And India is still a very poor country, so there aren’t very many people rich enough for the price differential not to matter – even people who are solidly in the middle and upper-middle ends of India’s income distribution are still poor by global standards
Overall, supermarkets in India serve the top 5% income bracket – certainly not the top 40%. So if a street vendor is genuinely losing 40% of his custom to the supermarkets, either that’s because he’s selling the local equivalent of porcini mushrooms and truffle oil, or because his patch is right outside the poshest part of the community. But there is absolutely no way this is being replicated across the community – the impact on regular vendors, especially the poorest ones who sell the cheapest products, will be negligible in the medium term.
The longer term consequences are harder to predict. To roll out its supermarket chain, Reliance has also had to build its own food supply and logistics network, since India doesn’t have one of these to start with. In other words, it collects produce from rural farmers, sorts, grades and packs it, and trucks it via distribution centres to its urban stores.
This is a long way from complete (the plan is to roll out over 1,000 stores, and it currently has 40), but could entirely transform the way India’s agriculture sector works – or, more accurately, the way in which it fails to transport produce to market in a timely fashion, leading to massive wasteage and ultimately driving poverty and starvation. At this point, undercutting the market stalls might be possible, which would be massively beneficial to India’s urban poor. Alternatively, the whole system could fail, and one of India’s richest families would become slightly less so. Either way, it’s very exciting and could do with some better reporting…
In other bloggish news, I’ve got a new article up at the Sharpener on why, even though homeopathy is nonsense, the reason for this is not because we have no idea how it could possibly work – indeed, we have no idea how a huge number of demonstrably effective drugs could possibly work.