European Internal Markets Commissioner Michel
Barnier has rejected calls by a standard-setting chief to adopt
global accounting rules that would ease the fallout from the
Eurozone’s sovereign debt crisis.
Barnier said adopting IFRS 9 Financial
Instruments will not be “the first solution to the problems”
that Europe is facing at the moment and is holding out for the
International Accounting Standards Board to finalise the final
elements of IFRS 9 before making a decision on implementation.
The first phase of IFRS 9, which deals with
classification and measurement, has been finalised while phase 2,
(impairment) and Phase 3 (hedge accounting) are a work in
IASB chairman Hans Hoogervorst urged the EU to
begin implementing IFRS 9 at a meeting of the International
Accounting Standards Boards’s trustees and its monitoring board,
which includes Barnier.
IFRS 9 allows some financial instruments such
as bonds to be classified as amortised cost, which would lead
to lower impairments, easing the cost burden. Under current
accounting rules, IAS 39 Available for Sale, debt is
automatically measured at fair value, which means impairment
measurements are more sensitive to market prices.
At a time when rating agencies are downgrading
the ratings of Irish and Greek sovereign debt, current accounting
methods will lead to a rise in impairments.
“Under IFRS 9 impairments will still be
painful but I am convinced it would be more timely done because the
cliff effect is much less severe,” Hoogervorst said.
Hoogervorst believes IFRS 9 could help
European banks avoid some of the broader market effects as the
“financial crisis has come back with a vengeance”.
In response to Hoogervorst’s advice, Barnier
said he would like to see how two other elements of IFRS 9 will be
finalised before endorsing the standards.