FRC chief warns of EU 'breakaway'

The UK’s top accountancy regulator has said that there are moves underway in the European Union looking to establish a breakaway version of international accounting standards, a move that could undermine efforts to converge IFRS with US GAAP.

Paul Boyle, chief executive of the Financial Reporting Council, who is stepping down in November, warned that such a move would also have serious repercussions in the US, as foreign issuers would have to iron out the differences between IFRS-compliant accounts and US GAAP.

‘I think there’s a serious risk of this,’ said Boyle. ‘We’re not just imagining it.’

Speaking to Accountancy Age TV, Boyle warned that any EU action would undo significant progress to align US and European accounting. Boyle is stepping down later this year after FRC efforts to deal with one of the most turbulent periods in the history of companies, standard setters and the profession.

‘I’m hopeful that the EU will pull back from the brink,’ he said. ‘It would be a big step backwards. Also the requirement for non-reconciliation [of IFRS to US GAAP for foreign issuers] is dependent on the IASB’s version of IFRS. The SEC would reimpose the very costly reconciliation.’

The FRC noted last week the recent increase in political pressure on both the IASB and Financial Accounting Standards Board.

‘[The FRC continues] to have significant concerns that the EU might adopt its own version of IFRS rather than the standards as published by the IASB,’ Boyle said in the reporting watchdog’s annual report last week.