Europe should not develop its own version of accounting standards or it will risk torpedoing the global effort to produce a single standard, said the head supervisor of the international accounting standards setter.
The warning came from Gerrit Zalm, who will on Thursday be announced as the new chairman of the trustees of the International Accounting Standards Board, and could put the board on a collision course with European policymakers, who have defended their right to alter standards where they see fit.
Mr Zalm is a former Dutch finance minister with strong links to Brussels. Last year, Tommaso Padoa-Schioppa took over the chairman’s role from Paul Volcker, the former Federal Reserve chairman, but stepped down after less than five months when he was offered the post of Italian finance minister.
European policymakers vote on each standard produced by the IASB. They agreed a “carve-out” to alter IAS 39, a standard on hedge accounting, after political lobbying, and this year came close to action on IFRS 8, on reporting business segments, after intense lobbying by UK-based investor groups.
“One of my first priorities will be no new carve-outs in Europe and trying to get rid of the existing carve-out, because if Europe is doing this, other countries could get the same inspiration and then all the advantages of the one programme fade away,” Mr Zalm told the Financial Times. “The fragmentation of standards is costly for the enterprise sector and it doesn’t help in creating clarity for investors.”
The comments come at a charged time because the US Securities and Exchange Commission is considering whether to allow foreign companies to file accounts under International Financial Reporting Standards without the current time-consuming reconciliation into their US equivalents, the costs of which can run into millions.
The SEC has maintained it will only accept full IFRS. If by that it excludes the European version, European companies – the bulk of the SEC’s foreign registrants – would be forced to continue reconciling their books. Last month the European Commission wrote to the SEC calling for it to recognise European and “full” IFRS as equivalent.
“I can fully understand the position of the SEC because it will be difficult for them if there are all kinds of regional exceptions,” said Mr Zalm.
By Jennifer Hughes in London
© Financial Times
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