European banks could gain significant breathing space in their fight against fair value accounting for financial instruments after it emerged that one of the most crucial standards for institutions may not be ready for 2005.
Link: IAS special report
Following concerns raised by the European Central Bank, headed by Jean-Claude Trichet, over the impact of fair value accounting, the International Accounting Standards Board has decided to issue another exposure draft on financial instruments standard IAS39, which restricts the circumstances where companies can choose to use the fair value option.
But the release of the exposure draft now makes it impossible for the whole of the IAS39 standard to be ready for the IASB’s self-imposed publishing deadline of the end of March.
‘Even with a very accelerated consultation process, the earliest the standard could be finalised would be around the end of June,’ said Tony Clifford, Ernst & Young’s partner specialising in IAS for financial services. ‘It then becomes much more difficult to get it endorsed in time.’
The situation could result in the European Commission delaying the endorsement of IAS39 until 2006, a decision that would ‘make a mockery of moving to IAS’ according to Clifford.
Another scenario could see the EC choosing to partially endorse IAS39, without the elements still under discussion. This would allow most companies to use the standard but could cause problems for the banks, especially those listed in the US.