Bolkestein attacked over accounting rules

Date: 01/06/2000

SINGLE Market Commissioner Frits Bolkestein is set to unveil a controversial blueprint for legislation which would force firms listed on EU stock markets to use new global accounting standards in their books.

Under the proposals, expected to be unveiled next month, Union firms would have to use standards developed by the newly reformed International Accounting Standards Committee for their main 'consolidated accounts' from 2005 onwards.

Supporters of the move say it would give a massive boost to investors because it would make it far easier for them to compare the financial performance of companies listed in different markets. Firms listed on more than one stock market also favour this approach because it would make it easier for them to produce the financial information required by local securities commissions, and would facilitate cross-border deals.

But the EU's accounting profession is gearing up for a battle over other parts of the policy paper, which is expected to be followed up with formal proposals for legislation at the end of this year.

They fear the Dutch Commissioner will propose a tough "endorsement mechanism" for vetting international standards, under which a panel of Union accounting experts and national officials could call on EU firms to modify those standards if they were deemed to be inappropriate.

This reflects concern within in the Commission that the London-based IASC could bow to strong pressure from the US' Securities and Exchanges Commission to mimick 'generally accepted accounting principles' (GAAP) developed there, and that the views of less-powerful member states would be ignored.

The IASC has done much to silence critics who complained it would be a US-dominated body by electing a board of 19 trustees including top financial names from across the world. The International Organisation of Securities Commission's (IOSCO), of which the SEC is a member, has also approved the new IASC system.

But many fear the US will resist any international standards which it regards as inferior to its own. This could mean that US bourses would continue to accept only American GAAP standards.

Critics such as the Europe-wide Federation des Experts Comptables (FEE) also see the planned EU endorsement mechanism as, at best, unnecessary meddling, and at worst, a move which would further undermine the tenuous take-up of international standards altogether. They point out that if trade blocs amended them as they saw fit, the result could be the same mish-mash of standards as currently exists.

Leaders of the Union's largest accountancy body, the UK Institute of Chartered Accountants, were expected to meet top Commission officials this week. "We think you should have one set of standards. That is to the benefit of the capital markets and the companies that are using them," said president-elect Graham Ward.

Single Market Commissioner Frits Bolkestein is set to unveil a controversial blueprint for legislation which would force firms listed on EU stock markets to use new global accounting standards in their books.