UK Firms Urged To Ignore Amended EU Accounting Standards Proposal

by Ulrika Lomas, for LawAndTax-News.com, Brussels

14 October 2004

The UK's Accounting Standards Board (ASB) this week urged firms in the United Kingdom to ignore an amended EU proposal on harmonising accounting standards when it comes into force in under three months.

On October 1, the EU voted to adopt an amended version of IAS 39 put forward by the European Commission, rather than the International Accounting Standards Board's original version, which contained detailed requirements concerning accounting for hedging transactions and fair value measurements for derivatives and other financial instruments.

The changes were made as a result of lobbying activity by banking interest groups, especially those representing the French banking sector, which argued that the original version of IAS 39 'Financial Instruments: Recognition and Management', which was based on US accounting standards, would disrupt the risk management practices of French banks.

Commenting on Monday, chairman of the ASB, Ian Mackintosh announced that:

“The position the EU has reached on adoption of IAS 39 is unsatisfactory. The adopted standard includes seriously weakened hedge accounting requirements and may give rise to artificial volatility in reported profits and difficulties in application as a result of limiting the fair value option."

He went on to add:

"There is also considerable uncertainty over the application of the adopted standard and its relationship to EU law, and those UK companies that will be applying international standards now have little time to address these difficult issues in order to implement the standard for 2005. Nor is it clear that these problems will in fact be resolved quickly."

"Today’s statement by the ASB and the guidance we will issue shortly will help provide UK companies with the clarity that they need.”

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