EU-US on track for 2009 accounting deadline

By Anna McLauchlin

Date: 02/02/06

Tommaso Padoa-Schioppa, the 65-year-old Italian who now has oversight of international accounting standards, has described convergence between European and American standards by 2009 as "ambitious but entirely feasible".

The appointment of the former European Central Bank board member to replace the US economist Paul Volcker as chairman of the International Accounting Standards Committee Foundation, was welcomed by businesses in Europe as a sign that they would not be subjected to the more prescriptive US norms.

But Padoa-Schioppa said that he would be a "neutral chairman" even if his appointment "increases the sense that the foundation is sensitive to special concerns in Europe".

He will chair meetings of the 21 trustees who oversee the independence of the International Accounting Standards Board, which sets global accounting standards (IFRS) that have been obligatory in Europe since 2005.

European businesses are worried about an EU-US roadmap that would see IFRS converge with US standards (GAAP) by 2009. They fear it would bring in unwelcome changes to current standards at a pace with which it will be impossible to keep up.

Convergence has been planned to ensure that non-EU companies listed in the US that are IFRS-compliant will no longer have to reconcile their figures to US GAAP.

Padoa-Schioppa said that those fears voiced in Europe were mirrored across the Atlantic and insisted that there was an "understanding" in the US of the need for both sides to give way to the other.

"There is no desire to make a dramatic change very soon. Europe and other parts of the world have two fundamental desires: stability, and convergence to remove the reconciliation requirement. We have to find the balance between the two."

He said that the 2009 deadline was "certainly ambitious but entirely feasible if you consider the speed with which things have progressed since the creation of the IASB".

He was sanguine about divisions within Europe itself over certain 'fair value' standards, widely applied in the US but hated by some in Europe because they force them to record risky financial instruments on their balance sheets.

US regulators have already warned that the 2009 convergence deadline will depend on IFRS being uniformly applied in Europe.

"The adoption of accounting rules is ultimately an EU competence, and it was an EU competence well before the EU decided that the IASB would be its standard setter," he said.

"So there may be an intense debate between EU states on the standards, but any differences have to be resolved simply because this is a matter where it has already been decided that the competence is European."

Padoa-Schioppa said: "It is necessary to change standards in order to achieve the convergence everyone is aiming at. However, changing measurement is always an inconvenience, even if the new standard is better than the old one."

Comments by Tommaso Padoa-Schioppa, new chairman of the International Accounting Standards Committee Foundation on the planned convergence between European and American accounting standards by 2009.

European Commission: DG Internal Market: Financial Reporting: Accounting: International Accounting Standards http://ec.europa.eu/comm/internal_market/accounting/ias_en.htm

International Accounting Standards Board: Homepage http://www.iasb.org/

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