Accounting hasn't been this political since the time Andersen was sent down the chute.

The G20 now wants the International Accounting Standards Board to promote financial stability, reports Accountancy Age. That's a totally different role to the IASB's function until now which has been to promote transparency. And that raises serious questions about whether the IASB will be able to remain independent because promoting stability will mean closer co-operations with institutions like banks.

How do you promote stability when your job is a standard setter who has to ensure that financial statements tell it like it is? Would, for example, the IASB have to take a charitable position to avoid a run on a bank? And isn't financial stability the job of the Basel Committee on Banking Supervision?

The IASB's precarious position is highlighted in a recent paper, The funding of international accounting standards by University of Dayton accounting professor Robert Larson.

The paper makes the point that IASB is vulnerable because it is not getting enough donations, particularly from corporations. Any institution that has little access to resources is threatened. And there is a question whether companies give money to influence the IASB's decisions.

"There is concern that the IASB has been and will increasingly be under political pressure to conform to the desires of certain stakeholders and interest groups. Indeed, in most political processes there is concern that money may influence outcomes in a way that is preferential to the interests of the donors. While no one has ever questioned the integrity of IASB members, the way it gets its operating money has raised questions. For example, in 2002 US politicians expressed concerns that the IASB
could be vulnerable to influence-buying by big business".

This raises an obvious question: why would a company want to donate any money if it did not think there would be any benefit to it. The paper cites the case where Enron donated money to the International Accounting Standards Committee Foundation (IASCF). According to Paul Volcker, then chair of the IASCF Trustees, a memo from Enron's chief accountant raised the question of what influence a gift to the IASCF would buy Enron.

Another concern is that donors night close the check book if the IASB adopted standards that they opposed.

What's needed is a different funding system. Accounting standard setters share one thing in common with judges and auditors: they not only need to be independent, they need to be visibly independent.

Unfortunately, the G20 communique has undermined that completely.