EU delays IFRS 8 ratification in shock move

The Economic and Monetary Affairs Committee of the European Parliament has
tabled a resolution that may force the
European Commission
to reappraise its plans to ratify IFRS 8, the controversial IASB standard on
segmental reporting.

The surprise move means that the EC may have to change its plans to ratify
IFRS 8 in its current form or see the EU Parliament step in and amend the
standard itself. The resolution, put on Aoril 18, has yet to be accepted with a
vote on it postponed.

The introduction of IFRS 8 has been plagued by controversy. The standard was
closely linked with the US standard FAS 131, and was introduced as part of the
IASB’s convergence project with the US.

Despite opening up IFRS 8 to consultation, the IASB came in for a barrage of
criticism from the ABI and NAPF, who did not respond to the consultation, but
later claimed that IFRS 8 gave management too much control of the segments
included in financial reports and risked causing incomparability.

Investors failed in their initial attempt to go over the head of IASB
chairman Sir David Tweedie and have the standard blocked by the EC.

The
EU
Parliament , however, may now step in and demand that the standard
be reformed, in what would be a major blow for the IASB.

In its motion for resolution to have IFRS 8 reappraised, the
Economic
& Monetary Affairs Committee called on the EC to ‘urgently
carry out an in-depth impact assessment before endorsing the standard’ and
warned that ‘should the Commission fail to do so, Parliament will carry out its
own impact assessment’.

The Committee said it was concerned that the Commission was ‘proposing,
contrary to the principles of better regulation, to import into EU law an alien
standard without having conducted any impact assessment.

The Committee move is believed to have already sent shockwaves through the UK
accounting establishment, with the FRC scheduling an emergency meeting on the
matter for next week Monday.

Further reading:

Tweedie in investor showdown over IFRS 8

Tweedie won’t pursue ‘convergence at any price’

IFRS
8 Segment reporting and the ongoing need for country-by-country
reporting