RegulationAccounting StandardsBanks pan EC over standards adoption delay

Banks pan EC over standards adoption delay

Brussels think tank predicts Europe will wait before adopting new fair value standard

It could be a long winter for European banks hoping to use the replacement
for a controversial accounting rule blamed for exacerbating the global financial
crisis.

Bruegel, a Brussels-based think tank, believes the European Commission may
wait until a new commissioner is unveiled before it adopts last week’s new fair
value standard.

The International Accounting Standards Board (IASB) released part one of its
three part replacement for IAS 39. It’s spent the past twelve months placating
European finance ministers and answering prickly hurry-up letters sent in a bid
to accelerate the process.

But upon release of the standard, Europe decided against immediate adoption.

Nicolas Véron, senior research fellow at Bruegel, said the wait may carry on
until a replacement for commissioner Charlie McCreevy is found ­ pushing the
adoption date into next year. “It is only natural that, because it is a very
important decision, it should not be taken by an outgoing commissioner but by a
newcomer.”

He said Europe may choose to wait until the remaining two parts of the fair
value standards are released. It will be at least eight months until part two is
finished.

He added the relationship with Europe has broken down and any adoption of the
standard might be conditional on the IASB making structural changes.

“The adoption decision will not just be taken on the standards’ merits, it
will be taken within a broad set of parameters, including some that relate to
the governance process and oversight,” Véron said.

Last week HSBC’s Douglas Flint wrote to McCreevy concerned that delay would
put companies in a competitive disadvantage. “The timely endorsement by the EU
is necessary to address an urgent need to improve the accounting for financial
instruments,” he said in the letter, seen by Accountancy Age.

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