EU laws should not stop harmonisation
EU directives should not block moves towards harmonisation of accounting standards in Europe, the president of the English ICA has said.
Graham Ward’s comments come in response to the imminent establishment of a Europe endorsement mechanism which the European Parliament has ruled must be in place to provide legal backing for member states.
Ward said: ‘Whilst such convergence within Europe is highly desirable and the acknowledged aim of the Commission, there are difficulties with the wholesale adoption of IAS on a global scale.
‘The overriding issue at the moment is that many larger companies, particularly European companies also listed on the US stock exchanges, are very concerned about convergence with the US. The difference in accounting rules between the US and European systems means that balance sheet figures can alter dramatically from one side of the Atlantic to the other.’
The commission’s decision earlier this year to require all Europe listed companies to adopt IAS by 2005 was welcomed by UK and Irish institutes following the endorsement of a single set of global standards by Iosco, the global club of stock markets. The move however was tempered by the EU’s ‘get-out’ clause.
UK regulators and professional bodies are concerned the EU’s filter mechanism will discourage the US regulator into approving global standards for US listings.
‘Convergence between international standards and US standards is the goal for standard-setters, investors and companies alike. They are all waiting for the SEC to endorse IAS for US listings. I place myself within that camp. After all, the laws of physics are not different in the US and Europe, and there is no reason why accounting rules should be.’