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EU delays could derail IFRS movement

Concerns are building that European uncertainty about IFRS 9 Financial Instruments could affect the push towards global accounting standards.

The International Accounting Standards Board (IASB) released the updated standard on financial instruments on 12 November, the first part in its urgent three-phase project to overhaul the controversial accounting rules.

On the day the IASB released IFRS 9, the European Financial Reporting Advisory Group (EFRAG) postponed its final endorsement advice on the standards saying it needed more time to “consider the output from the IASB project to improve accounting for financial instruments”.

Deloitte’s IAS Plus website, moderated by Paul Pacter, suggested EFRAG’s deferral meant IFRS 9 would not be available for use in Europe for 2009 year-ends.

Deloitte Ireland said there was still a significant battle to get the new standard endorsed by the EC, which is due to happen before the year end so European companies can use the new standard.

“The previous standard nearly brought the European IFRS project to a halt and was only saved by a specific European carve out. Any similar difficulties could put the global IFRS convergence project in doubt and be a major set-back in bringing the US onto IFRS,” Deloitte Ireland partner Glenn Gillard warned.

Earlier this month, the EC wrote to the IASB suggesting urgent changes needed to be made to IFRS 9 as the current draft did not strike the right balance between fair value accounting and amortised cost accounting.

Institute of Chartered Accountants of England and Wales financial reporting faculty head Nigel Sleigh-Johnson said Europe’s dithering on endorsement could prove to be a disadvantage for companies in the continent.

“Any delay in endorsement of the standard for use in the EU will create uncertainty in already uncertain times, and will represent a competitive disadvantage for companies that wish to use the improved accounting embodied in the new standard,” Sleigh-Johnson said.

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