Europe-wide accounting standards move closer

Date: 07/10/1999

By Peter Chapman

THE European Commission is considering moves to allow listed EU firms to use International Accounting Standards (IAS) in preference to their domestic systems.

The option is being explored by Single Market Commissioner Frits Bolkestein's officials as they prepare to unveil proposals early next year aimed at making EU accounting systems more uniform.

The move reflects increasing concern that European firms currently have to comply with different standards depending on where they are based, confusing investors and adding to the costs of multinationals operating in a number of EU markets.

It also follows efforts to boost the role of IAS on the world stage, and signals the Commission's support for the development of a set of globally acceptable 'core' basic standards for listed multinational companies. These would be approved by stock exchanges across the globe, including US markets where IAS are not yet allowed.

But critics claim this could lead to a lowering of standards. Alan Cook, technical director of the UK's Accounting Standards Board (ASB), argues that its own standards - which are mandatory for UK firms - are often technically superior to those developed by the International Accounting Standards Committee.

In the long run, Cook fears, firms would shift to using IAS, driving the highly respected ASB out of the market. In the meantime, he claims, making IAS voluntary would make the situation even more confusing, as some firms took up the option while others stayed with the old system.

Cook said the ASB would prefer a system where firms continued to use their current systems, adding an annexe to their accounts explaining any differences between their approach and that of the IAS.

British officials say the UK government is unlikely to agree to proposals which would threaten the pre-eminence of its City-based accountancy profession in Europe.

Commission officials insisted this week that they had not ruled out the approach suggested by ASB. "The matter has not yet been fully decided and alternative solutions are still under examination," said one, who added that these would be presented to member state experts later this month. "One of those solutions could be a requirement for certain companies to reconcile to IAS instead of preparing primary financial statements in accordance with IAS," he stated. Moreover, he said the Commission would not target small unlisted companies in its proposals.

Currently, only Germany, France, Belgium, Finland, Luxembourg. Italy and Austria allow firms to use IAS instead of local standards for listed companies.