EN Official Journal of the European Union CE 84/814

(2004/C 84 E/0909)

WRITTEN QUESTION E-0582/04

by Richard Corbett (PSE) to the Commission

(26 February 2004)

Subject: Application of Accounting Standard IAS 32 to co-operatives

Is the Commission aware of the effect that the adoption of Accounting Standard IAS 32 by the EU's Accounting Regulatory Committee would have on the co-operative movement?

Does the Commission accept that it was drawn up with only public limited companies in mind and is totally inappropriate for co-operatives because it classifies co-operative share capital as debt?

Will the Commission ensure that, as in the USA, the application of this particular provision to co-operatives should be avoided, without which the effect on the co-operative sector would be devastating?

Answer given by Mr Bolkestein on behalf of the Commission

(5 April 2004)

It should first of all be remembered that only those cooperatives whose shares are traded on a European stock market and that produce consolidated accounts will be affected by Accounting Standard IAS 32, i.e. a minority of cooperatives. Moreover, according to our information, the American situation is more complex than the Honourable Member describes since in the United States stock exchange-quoted entities cannot benefit from the deferred application of the provisions of the American standard FAS 150, equivalent to IAS 32.

That said, the Commission is well aware of the problem raised by the possible reclassification of cooperatives' share capital as debt in the application of Accounting Standard IAS 32. This issue has been the subject of numerous discussions with the International Accounting Standards Board (IASB) and is currently under examination.

Although Accounting Standard IAS 32 was published by the IASB in December 2003, the specific accounting treatment of cooperatives' shares is currently being examined by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB, where the Commission has observer status. Progress has already been made thanks to sustained dialogue between the IASB and the European Association of Co-operative Banks. It would appear that the IASB and IFRIC are starting to have a better understanding of the way in which cooperatives operate as well as the characteristics of their shares.

Discussions have highlighted that there is more than one type of cooperative, that the issue of shares is complicated and that their accounting treatment can depend on attributes given to them by the statutes of the cooperatives concerned. It is up to the IASB to take into account the variety of these situations through either an interpretation of Accounting Standard IAS 32 or advice on its application.

The IFRIC should be able to issue such interpretation or advice before the summer, clarifying the fact that cooperative members' contributions are considered as capital if their reimbursement by the cooperative is subject to a decision by the competent body within the organisation, implying that this reimbursement is neither automatic nor unconditional.

It would seem that the cooperative world, particularly its banking sector, will be satisfied with this result. The Commission will continue to follow very closely the developments in this field in order to guarantee that the result of current discussions accords with the indications provided by the IASB.