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(2004/C 84 E/0929)

WRITTEN QUESTION E-0662/04

by Erik Meijer (GUE/NGL) to the Commission

(9 March 2004)

Subject:   Efforts to adopt uniform and transparent rules on valuing the assets of financial institutions and the resistance of the EFR to the IASB

Source: De Volkskrant, 21 February 2004.

Answer given by Mr Bolkestein on behalf of the Commission

(15 April 2004)

At the Economic and Financial Affairs Council (Ecofin) of 15 July 2003, the Commission and Member States confirmed their commitment to the European financial reporting strategy adopted by the Council and the Parliament in 2002 and to high quality accounting standards for the Union. The Commission and Member States underlined the need for international accounting standards to be adopted in the EU, as soon as possible, for application from 1 January 2005 onwards.

On 29 September 2003, the Commission adopted Commission Regulation (EC) No 1725/2003 (1) endorsing into Community law all existing IAS with the exception at this stage of IAS 32 & 39 that were being revised by the International Accounting Standards Board (IASB).

The IASB has yet to finalise IAS 39, a standard on the recognition and measurement of financial instruments. The Commission intends to examine it as soon as possible, together with IAS 32 issued in December 2003 by the IASB. This examination will be carried out on the basis of the opinion to be provided by the technical experts of EFRAG (2) and with the assistance of the EU Accounting Regulatory Committee.

The Commission considers that it is particularly important for the EU to have a sound and robust accounting standard on financial instruments in place in 2005, in order to achieve a higher degree of comparability between companies, notably in the banking and insurance industries, to provide better information to investors and stakeholders in general and to close possible accounting loopholes that could lead to the manipulation of accounts.

It is important for the IASB to ensure that IAS 39 remains both theoretically sound and applicable in practice. Both characteristics and the way they interact are at the heart of the present controversy about IAS 39. In particular, the banking and insurance industries fear, as illustrated by the position recently taken by the European Financial Services Round Table, that the media and the general public lack the capacity to distinguish between real volatility due to actual economic fluctuations and ‘artificial’ accounting volatility created by a complex financial reporting model that sometimes fits with difficulty bank's risk management practices. Considering the complexity of IAS 39 and the volume of transactions at stake, this fear has to be addressed.

In this context, the Commission has urged both the IASB and industry to pursue their dialogue in order to find an appropriate solution on the two remaining controversial issues raised by IAS39, namely macro-hedging (hedging effectiveness and hedging of core deposits) and the insurance measurement mismatch. Accounting standard-setting is a gradual process and the preference of the Commission would be for the IASB to find a temporary situation pending medium to long term improvements to the standards.

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(1)  Commission Regulation (EC) No 1725/2003 of 29 September 2003 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council, OJ L 261, 13.10.2003.

(2)  the European Financial Reporting Advisory Group.

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