In the former East Germany, the Honecker regime cunningly blanked-out maps west of Berlin in a bid to foil escapes. This is an approach that the IASB’s pension team appears to have taken literally.
An example is Paragraph 50 of the observer notes for the board’s December 2007 discussions: “A Board member argues: [Quote omitted from observer notes.]” The staff team, headed by Anne McGeachin, repeat the approach at paras 54 and 56.
IPE has returned to the official IASB recording of that December 2007 meeting session to analyse the discussion around those missing paragraphs. It appears that the censored meeting paper relates to argument raised by board member Stephen Cooper on the putative content of the pensions discussion paper.
“Let me say that I was the one that expressed, although it’s not my preferred method, expected return. I would prefer to have it at the discount rate,” Cooper began. “I don’t see anything wrong with expected return. All it is is cost accounting just turned round the other way.
“If you say that expected return is just ‘pick a number’, well, you are saying that fair value measurement is just ‘pick a number’, because fair value measurement depends upon getting to a cost of capital. And all the expected return is is the cost of equity applied to the equity investments in the pension fund.”
If Cooper was happy to identify himself in public as the holder of what might strike IPE’s readers as a perfectly sensible view, why would McGeachin’s team subject the constituents who fund the IASB’s activities to a tedious parlour game?
In response to a private request from IPE for the staff to reconsider, IASB director Wayne Upton, the author of the observer notes policy, wrote: “We start with the Board paper. We then redact personal references, information provided in confidence, IASB management or administrative information … Project managers are given the authority to make these decisions. I do not challenge their judgment. The observer notes must include the staff recommendations …” But the December observer notes omitted the staff recommendation at paragraph 58.
The problem of redacted IASB observer notes extends beyond pensions. Similar practice emerged in July of this year on the IASB-FASB IAS12 Income Taxes project. Coincidentally, McGeachin also staffs this particular effort. During the discussion, IASB member Robert Garnett revealed that: “The staff paper, paragraph 24, is part of the response for the apoplectic response at this end of the table,” began Garnett. Reading from the redacted text, he continued: “‘Deferred tax liabilities for investments in foreign subsidiaries are not recognised when the investment is essentially permanent in duration.’ Those are the words there.”
IPE approached a globally recognized tax accounting specialist. We asked this expert to come up with a “sensible reason”, from a technical perspective, for editing paragraph 24. An expert was at a loss.
The issue extends beyond single paragraphs. Sometimes entire meeting recordings fail to materialise - as part of its meeting due process, IASB actively bans journalists from recording its proceedings. Take the recordings of the 27 June pensions working group meeting in London, where an unofficial account of the meeting does exist in German.
Prepared by a pensions accounting specialist with Deloitte’s German practice it states, for the benefit of the IASB’s anglophone pensions team: “This part of the meeting was summarised by the staff as follows: … the definition of contribution-based promises is still flawed.” Oh dear.
In a bid to make up the informational deficit, IPE has contacted experts in Belgium, the Netherlands and Switzerland to establish the accuracy of the Deloitte iasplus.de account. Regarding the Dutch plans, well-placed sources have confirmed that. due to indexation requirements, the new contribution-based definition probably fails to address that country’s ‘troublesome’ plans. In Belgium, the IASB, it seems, has failed to snare the ‘troublesome’ plans with the new definition - a key purpose of the project.
In Switzerland, a different picture has emerged. A Swiss source reports that. having made the IASB aware of implementation issues with the proposed definition, the IASB response was that they would consider any cross-border solution - not one limited to the Swiss fact pattern.
Speaking earlier this year, IASB project leader Anne McGeachin said IFRS must be applicable worldwide.
So rather like Honecker’s real, existing socialism, we end up with a great-sounding theory that no one wants and that no one can apply in practice. It is a roadmap to nowhere.
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