Strong words from Sharon Bowles at the Lords yesterday, about whether the Secretary of State should delegate responsibility to the UK Endorsement Board.
With the proposed new insurance standard, IFRS 17, the issues go further than unrealised profits, and credit is given to reduce liabilities, not merely for unrealised gains, but for anticipated future income, giving the appearance of capital. This cannot be proper accounting. These unrealised gains, and anticipated income can neither be used to service debt, pay down debt or invest in other assets, nor have any value as collateral. No way is it true and fair, and anyone endorsing it would surely have to be nobbled, which seems to aptly describe the UK endorsement board.
Three have been members of the former Accounting Standards Board, which has approved defective accounting standards in the past. Several were partners in accounting firms at the time banks were collapsing. Mr Ashley, former ASB member, was also a career KPMG partner, which the UK Endorsement Board website fails to note, and of course KPMG were the auditors of Carillion and HBOS.
In the case of former ASB member Mrs Wallace, at least the website references her connection to PwC, the auditors of Northern Rock, but it is silent about her time at Arthur Andersen. The Board includes another recent PwC partner, and a partner from Grant Thornton, which is currently defending itself, given the problems in auditing collapsed Patisserie Valerie. There is no mention that Board member Kathryn Cearns has worked for the ASB, and then for the law firm Herbert Smith Freehills, which as well as providing defence advice to PwC and KPMG, also instructed the ICAEW’s counsel to give the dubious ‘true and fair’ legal opinions for the FRC, from which the Government eventually distanced itself, as I discovered in FOIs.
Liz Murrell, an employee of the Investment Association, and Paul Lee, a consultant to the Investment Forum, are also on the Endorsement Board, and both those organisations are dominated by insurance companies whose accounts will benefit from using IFRS 17.
Who is there to represent the public interest, and act on the known lie that Brydon, and indeed the Government’s consultation acknowledge, that accounting standards alone cannot be true and fair. Who is there to represent the policyholders of insurance companies who, barring more Government bailouts will be the victims [when] accounting standards cause them loss. One could hardly wish for worse in terms of an unbiased view.
And no wonder they need protection from liability. Today is a bad SI. This is a bad SI, and we don’t need this Endorsement Board.
It is difficult to improve on that. (I stepped down from the Technical Advisory Group in February for reasons I made clear in a letter to Pauline Wallace, chair of the Board). This one will not go away.
[EDIT] The full transcript, including some equally fruity stuff from Lord Sikka, is here.
