The EC’s decision to not fast track
the endorsement of IFRS 9 was supported by some parts of the German
Accounting profession and opposed by others.

The German Ministry of Justice representative
who attends EC Accounting Regulatory Committee meetings, Christoph
Ernst, voted against fast-tracking IFRS 9 endorsement. However,
this contradicted advice Ernst received from the German Accounting
Standards Board (GASB).

Of the seven GASB members, just one was
distinctly against endorsing IFRS 9, and one was hesitant. GASB
president Liesel Knorr says the other five thought endorsing the
standard would send an important signal that Europe wants a mixed
measurement model.

Knorr says Europe must not wait until the
International Accounting Standards Board (IASB) finishes its
financial instruments project.

“We need to discuss now what the no-go areas
are, what we want, and where we see room for manoeuvre,” she says.
“If we wait and see, we are not any better off; we may be worse

The IASB fast-tracked the release of its new
financial instruments classification and measurement standard in
part because of pressure from the EU. But when the standard was
released last November, the EC decided not to fast track the

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While the GASB supported the IFRS 9
endorsement, Ernst wanted more fair value and supported the delayed

Likewise, German professional accountancy body
Institut der Wirtschaftsprüferin Deutschland (IDW) supported the
delayed endorsement of IFRS 9.

IDW chief executive Klaus-Peter Naumann says
that although the IDW mostly supports the concept within IFRS 9
that the measurement attribute of financial assets is based on the
entity’s business model for managing the financial assets, the
institute thinks the standard has some weaknesses.

“Although IFRS 9 acknowledges that an entity
might not have a single business model for managing all its
financial assets, it remains unclear how to determine at what level
this condition should be applied. In our view, management’s
intention for an individual financial instrument constitutes the
decisive factor in determining the appropriate value of a financial
asset. Therefore, management’s intention for an individual
instrument should be decisive rather than the business model(s) of
the reporting entity,” Naumann says.

The IDW has suggested a number of changes to
IFRS 9, including allowing reclassification when management’s
intention in respect of individual financial instruments changes as
a consequence of altered market conditions and to avoid unjustified
loss recognition.

“We have argued that reclassifications should
apply from the date of change in management’s intention,” Naumann

Knorr says some financial reporting
stakeholders have the impression that IFRS 9 is a done deal,
whereas others see the standard as essentially an exposure draft,
with “everything still up for grabs”. She thinks it is somewhere in

The GASB must provide the ministry with
advice, but other stakeholders and lobbyists must also put their
views forward.

Knorr notes that with the next G20 meeting
coming up, the GASB will make sure it keeps in close discussions
with the ministry.

“We will very much make sure that we give him
advice, which is so convincing that he can’t go off it,” Knorr