EN Official Journal of the European Union CE 84/835

(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

1. The International Accounting Standards Board (IASB), consisting of 14 prominent former industrialists, is currently drafting the uniform rules IAS 32 and IAS 39 for annual reports by businesses in Europe, as part of the International Financial Reporting Standards (IFRS). Does the Commission intend to make these rules compulsory, as from the 2005 financial year, for all of the approximately 7 000 listed enterprises in Europe, so that they will be bound by uniform and thus comparable standards for determining the value of turnover, depreciation, derivatives, options and profits?

2. What guarantee does the Commission have that the IAS/IFRS will adopt as a standard the most stringent rules which currently exist in the individual EU Member States concerning the book-keeping of enterprises and annual accounts, so that the efforts to adopt uniform rules do not result in more flexible rules which in practice will in some cases afford greater scope for action to the detriment of other businesses, authorities, employees, shareholders, bondholders, suppliers and customers?

3. Does the Commission anticipate that the introduction of such rules will render completely impossible any repetition of such scandals as those which have occurred at Ahold and Parmalat?

4. Is the application of the proposed rules sufficiently public to ensure that organisations of outside stakeholders, the media and public opinion can gain a genuine understanding of what is actually happening inside individual listed enterprises?

5. Is the Commission now aware of the objections to the IASB on the part of the European Financial Services Round Table (EFR) which was set up in March 2001 and which is frightened by the prospect that the public will be able to perceive annual fluctuations in the results of banks and insurers?

6. What will the Commission do to ensure that, by the intended date — 1 April 2004 — certainty exists regarding the introduction in the near future of IAS 32 and 39?

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.

(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.