Anglo Irish Deny Policies "Not in Accordance" with IFRS

Anglo Irish Deny Policies “Not in Accordance” with IFRS

From The Irish Times:

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This is probably the most sensible thing a bank can do, IMO. It is clearly a hole in IFRS - that a bank is not allowed to be cautious. I understand that it was to stop banks piling in general provisions to avoid tax that the rule was introduced; does anyone know if this is in fact the case?

My understanding was it was introduced to stop them smoothing profits out. So, build up the GP when times are good and then release it when times are bad for an income boost.

One of the fundamental concepts in accounting is prudence. IFRS have sidelined prudence. But in these turbulent times logic dictates that prudence should be uppermost. Anglo and their auditors are correct in overriding IFRS with regard to the making of general provisions. From a taxation perspective general provisions are added back. Long live the smoothing approach.