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November 23, 2009

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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