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EC Declaration on IAS 39 and IFRS 7

Oct 16, 2008

In our news story immediately below, we noted that the European Commission has approved, for use in Europe, the IASB's recent Reclassification Amendment to IAS 39 and IFRS 7.

That approval was preceded by an extended discussion of a number of financial instruments accounting matters by the EC's Accounting Regulatory Committee (ARC, which met on 15 October 2008), by EU G8 Heads of State (who met on 4 October 2008), and by the ECOFIN (the Eurogroup and EU Economic and Finance Ministers Council, who met on 6-7 October 2008). It was also preceded by an EFRAG Recommendation and several related speeches by EC President Jose Manual Barroso (Speech #1, Speech #2, and Speech #3). Here are links to the various ARC documents: Concurrent with the Commission's decision to approve the IAS 39 reclassification amendment, the Commission also made the following public declaration:

COMMISSION DECLARATION

Given the turbulence in financial markets, the Commission will continue to closely monitor all accounting issues that could impact on the stability of financial institutions and financial markets and will keep under constant review the implementation of IAS 39 and IFRS 7.

The Commission will continue to work intensively with all stakeholders and will organise a meeting within the next few days* to consider other possible issues under IAS 39 and IFRS 7. The Commission will, in particular, review the issue of the fair value option, embedded derivatives, insurance questions, and any other issues in IAS 39 and IFRS 7 of concern, and requests the IASB and CESR to begin work immediately in order to find appropriate solutions in the public interest taking into account an appropriate level of transparency. The Commission will propose further amendments to IAS 39 and IFRS 7, by all legal means if necessary, by the end of October.

The Commission also considers that an in depth reflection is needed on fair value accounting, including possible procyclicality effects. The newly formed EFC group on procyclicality could be one avenue for taking forward this question expeditiously.

The Commission takes note that Member States want to have an in depth reflection on the standard-setting process.

*IAS Plus comment: This meeting is set for Tuesday 21 October 2008.