Is it a strong signal of support for the international harmonisation of accounting standards, an admission that there is no longer such a thing as UK GAAP, or another move which will increase the confusion around the introduction of international accounting standards?
All of these interpretations are possible following the decision by the UK’s Accounting Standards Board to widen the scope of the incoming standards on financial instruments.
ASB chairman Mary Keegan’s comments confirm how closely the ASB now follows the IASB: “Now that the IASB has issued its revised versions of IAS 32 and IAS 39, it is time for us to start implementing them in the UK. A consistent approach to the measurement of financial instruments is very important, as is the greater use of fair values, particularly for derivatives, so we are proposing that all listed entities should be required to apply the international standard.”
Richard Raeburn, chief executive of the Association of Corporate Treasurers (ACT), welcomed the ASB’s announcement. He told Financial Director: “We have worked extensively with the ASB and the IASB to highlight the remaining weaknesses in the proposals for hedge accounting, such as the restrictions on netting of risks, and it is vital that the IASB moves quickly to reopen consultation on how IAS 39 can be further improved.”
The European banking industry has been fighting the IASB’s plan on financial instruments every step of the way, so it is perhaps not surprising that the British Bankers’ Association was a little sniffy. A BBA spokesperson told Financial Director: “From 1 January 2005, all listed companies across the EU will be obliged to follow only IAS as adopted by the European Commission. It’s not entirely clear, therefore, how the UK can require its listed companies to do something beyond this.”
The bankers have a point. The EC needs to move quickly to confirm its timetable for endorsement of these final standards without further modification so that companies have the clarity and confidence they need for implementation.
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