Sweet taste of Brussels fudge set to harmonise accounting rules

A classic Brussels fudge appears set to diffuse a transatlantic standoff over accounting standards for banks and insurance companies.

A classic Brussels fudge appears set to diffuse a transatlantic standoff over accounting standards for banks and insurance companies.

The European Commission is set to ratify a plan to "temporarily" remove 17 paragraphs from the controversial International Accounting Standard (IAS) 39, which covers financial services companies.

The EC has been struggling to persuade its 25 member countries to adopt in full the new International Accounting Standards, which are aimed at harmonising the treatment of accounts around the world. The fear was that unless IAS was adopted, US accounting principles would become the world standard by default.

But at least four European countries - Belgium, France, Italy and Spain - voiced objections to two of the standards, ISA 32 and IAS 39. Both relate to financial services companies.

The opposition reached fever pitch last year when Jacques Chirac, the French President, launched an attack on the accounting standards, saying "they would have harmful consequences on financial stability".

But in the past few weeks, objections to IAS 32 have been dropped and officials in Brussels are confident that the four countries will accept a compromise deal on IAS 39, brokered by Frits Bolkestein, the European Commissioner for the internal market.

Under the plan, 17 paragraphs will be removed from the European version of IAS 39 for a "transitional period". Philippe Pelle, an official in the European Commission, said that under the "temporary adjustment", banks will now be able to count in their "core" deposits, as longer-term sums for hedging purposes. Core deposits are made up of current accounts and some deposit accounts, which theoretically can be withdrawn easily.

European companies will be able to choose whether to comply with the full IAS 39 or the "IAS 39-lite" approved by the EC.

The revised version of IAS 39 was drawn up by EC officials earlier this month. It was discussed by the commissioners last week and their recommendations will go to member states early next month.

On 8 September there will be a meeting of the European political advisory group the Accounting Regulation Committee, presumably to give its blessing. The Commission itself has a late October deadline to give the rules final approval.

This leaves a tight timescale for implementing the new rules, which are due to come into force by 1 January.

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