PracticeConsultingPlans for banking standard undecided

Plans for banking standard undecided

Proposals to force banks to measure financial instruments at fair value could still change, the chairman of the International Accounting Standards Board told City delegates today.

At a roundtable meeting in the City today, organised by the Centre for the Study of Financial Innovation, Sir David Tweedie met with representatives from leading financial institutions to outline the IASB’s plans to develop a single set of accounting standards to be used in cross-border listings.

Sir David said: ‘We haven’t got a fix view on this yet.’

IAS 39 Financial Instruments has already come in for much criticism from European standard setters.

The fact that many present knew little about the history or powers of the IASB and Sir David was a stark reminder of the uphill battle the global standard setter still faces.

Robin Monro-Davies of Fitch asked Sir David: ‘I’m not sure of your powers? Why are people so scared of you? I go to banking conferences, obviously after you’ve talked to them, and everyone is scared of you!’

Modest in his response, Sir David replied that outside Europe he only had the ‘power of persuasion’. But, ‘in Europe there is real power’.

The European Commission is paving the way to make European listed companies adopt IASs by 2005, at the latest.

Monro-Davies said: ‘99% of the banks I talk to don’t want fair value accounting.’

But the option in Europe no longer exists following the European Council’s decision last week to change its directives to make companies measure financial instruments at fair value instead of historical cost. This will cause more volatility as all gains and losses will now have to be put on the profit and loss account.

Under the new law, companies will now have to apply IAS 39 without legal conflicts. IAS 39 will take effect in 2001.

Links

Deadline could mean standards compromise

Europe gives go ahead to IASs

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