Three FT stories on IASB in Europe

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03 Feb 2004

Yesterday's edition of the Financial Times (2 February 2004) contained three stories about the adoption of IFRS in Europe: US warns Europe on accounting rules. In this front page story, Donald Nicolaisen, chief accountant of the US Securities and Exchange Commission, "warned the European Union not to water down controversial accounting rules on derivatives, fearing that it could endanger global accounting convergence....

The IASB is under intense pressure from the European Commission for further concessions on its derivatives rules, known as IAS 39, because EU banks fear they could inject strong volatility into their accounts."
  • French call IASB to account. "French banks have warned that the long-standing goal of convergence between US and international accounting standards must not thwart suitable accounting rules on derivatives for the European Union.... French banks want significant changes to the IASB's derivatives rules, known as IAS 39, which are based on US equivalents."
  • A convenient fudge to keep the dividends up. Nice people, those folk at the IASB. "The IASB is expected to require pension fund surpluses and deficits to appear on the face of the accounts. At current levels of pension fund deficits this could lead to a big reduction in distributable profits in the EU." The writer goes on to say: "I hear the IASB is now planning to borrow a fudge from the UK's FRS 17 on pensions. This standard applies to group accounts, but adoption by subsidiary companies is not mandatory. The law on distributability, in contrast, applies to single companies, but not to the group. So it would be possible, for example, even if the group accounts showed a company to be technically insolvent after including the pension fund deficit, to pay a dividend."
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