The Investment Management Association (IMA), the UK's trade body for the country's GBP3.4tn asset management industry, has warned that the European Commission's rush to reform accounting standards in the light of the financial crisis risks causing increased uncertainty for the investment community regarding financial accounts.
"What is important to users is transparency, and comparability and consistency
in financial reports. But seeking to make changes by the end of October,
as the Commission proposes, runs the risk that this will not be maintained and
such changes could result in unhelpful reporting. Investors worldwide need one
set of financial reporting requirements, not many variations," commented
Liz Murrall, Director of Corporate Governance and Reporting at IMA.
"Although the current credit crisis requires swift measures by governments
and regulators, fundamental changes in accounting should be implemented only
after due process and the involvement of all stakeholders," she added.
Murrall was responding to the Commission's announcement last week that it had adopted
amendments to accounting standards intended to mitigate the consequences of the
recent turbulence in financial markets. The amendments are designed to ensure
that EU companies have the same flexibility as their American competitors to
reclassify assets held-for-trading into the held-to-maturity category. In these
circumstances, financial institutions in the EU would no longer have to reflect
market fluctuations in their financial statements for these kinds of assets.
The changes will apply as from the third quarter of 2008.
Internal Market Commissioner Charlie McCreevy said: “By adopting these
amendments, the Commission has responded in record time to the request of the
ECOFIN Council on October 7. I commend the European Parliament and the Member
States in the Council without whose excellent co-operation, this would not have
been possible. This shows once again that the EU is responding quickly and decisively
to the current financial turbulence. I also welcome the speed with which the
International Accounting Standards Board and all bodies involved in the endorsement
process have responded to the ECOFIN conclusions."
The ECOFIN Council adopted the following conclusions in relation to accounting
standards:
"We underline the necessity of avoiding any distortion of treatment between
US and European banks due to differences in accounting rules. We take note of
the flexibility in the application of mark to market valuation under IFRS as
outlined in recent guidance from the IASB. Ecofin strongly recommends that supervisors
and auditors in the EU apply this new guidance immediately. We also consider
that the issue of asset reclassification must be resolved quickly. To this end,
we urge the IASB and the FASB to work together on this issue and welcome the
readiness of the Commission to bring forward appropriate measures as soon as
possible. We expect this issue to be solved by the end of the month, with the
objective to implement as of the third quarter, in accordance with the relevant
procedures."
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