PracticeConsultingFRC wades into battle with banks

FRC wades into battle with banks

The UK's accounting regulator has waded into the tinderbox argument over financial instrument standard IAS39, as the European Commission draws closer to a final decision.

Link: Gang of four unites to derail IAS39

In a letter sent to internal markets commissioner Frits Bolkestein, Financial Reporting Council chairman Sir Bryan Nicholson argued that the European Union must adopt the standard, or there could be dire consequences.

The move represented further attempts to influence a conflict within the EU, even as politicians struggle to settle who will become president of the commission.

Referring to both IAS39 and IAS32 Sir Bryan said: ‘Failure to endorse these standards will have serious implications for the quality and credibility of the EU’s financial reporting regime.’ He added that failure to endorse the standards would be ‘incompatible’ with the stated objectives of the EU’s own regulation for international accounting standards.

As things stand, four nations – France, Belgium, Italy and Spain – have registered their objections to the use of the standard for Europe’s listed companies from next year. A further six, including Germany, have yet to clarify their opinions on the matter.

The states have until 30 June to provide their definitive opinion, in writing, to the EC. The commission is expected to make its final decision on whether to propose endorsement of IAS39 or reject it on 14 July. It could also look to run with a version of the standard that differs from the International Accounting Standards Board’s in crucial areas.

The commission is also waiting for the final opinion of its accounting advisors EFRAG, which, despite considerable dissent from its members, is expected to recommend endorsement on 7 July. However EFRAG’s opinion is looking less influential as the arguments become more political.

Opposition to the standard is centred on concerns from European banks over the introduction of ‘false volatility’ into their accounts due to IAS39.

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