PracticeConsultingIAS39 dead in the water

IAS39 dead in the water

The final nail looks set to be driven in the coffin of financial instruments standard IAS39 tomorrow, as the European Commission's accounting regulatory committee meets to decide its position on derivatives.

Link: IAS special report

The International Accounting Standards Board’s treatment of interest rate margin hedging in the standard has caused fury from banks around Europe, which argue it will create false volatility in their accounts.

A significant number of Europe’s governments have backed this position.

Although not all nations responded by the commission’s 30 June deadline to clarify their positions on IAS39 in writing, Slovenia has added its name to the list of those opposed to the standard, alongside France, Belgium, Italy and Spain.

Under revised voting rules, due to come into force in November, the opposition of the five states would be enough to create a ‘blocking minority’ and stop the standard being endorsed.

A spokesman for the EC said it would be ‘difficult politically’ for the committee to push through a vote on endorsement before November to avoid this situation. If Germany comes out against IAS39 tomorrow, it would also create a blocking minority under current rules.

‘The endorsement process will not be as straightforward as we hoped, but we will rise to the challenge,’ said the EC spokesman.

Finance ministers from across Europe, including German representative Hans Eichel and his Italian stand-in counterpart Silvio Berlusconi, met on Monday. At the request of the French, IAS39 was on the discussion agenda with internal market commissioner Frits Bolkestein providing an update on the situation.

Nigel Sleigh Johnson, head of financial reporting at the ICAEW, said: ‘The positions of the member states are not definitive yet, as there are still consultation processes to be undertaken. We are hopeful that IAS39 will be endorsed eventually as there are no workable alternatives.’

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