EU Pushes for Changes in Accounting Proposals

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Byline: Patrick Blum in Brussels

The European Union wants more consultations over proposed international accounting standards to ensure they better reflect the needs of the financial industry. It particularly wants changes to two controversial rules for accounting derivative instruments, which industry representatives believe could cause financial instability.The proposals put forward by the International Accounting Standards Board (IASB), an independent London-based institution, will replace national rules across the EU from 2005 and will apply to all listed companies. The aim is to raise the quality of financial reporting and avoid a repetition of recent financial scandals.

While all EU members are in favour of adopting common accounting standards, some of the IASB proposals have caused concern. "All member states have concerns," a European Commission official said.

The two rules would require all of a firm's portfolio to be valued at current market prices, which is similar to what happens under the US's Generally Accepted Accounting Principles (GAAP).

Frits Bolkestein, the internal market commissioner, has written to Sir David Tweedie, IASB chairman, expressing concern about the two rules. "Both the banking and insurance sectors are continuing to make strong representations about the serious difficulties they face with the latest drafts," he said. He urged the IASB to hold further discussions with bank and insurance representatives to seek an acceptable solution.

The European Private Equity and Venture Capital Association (EVCA) is also concerned that the rules could be extended to all private companies. "This is a danger to the private equity industry," said the EVCA, as it would force private equity funds to produce consolidated accounts. …