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July 26, 2009

IASB publish first IAS 39 draft

The International Accounting Standards Board’s (IASB) timetable for improving accounting for financial instruments classification and measurement is challenging, and it may not be practical to apply the standard for this year-end, according to Institute of Chartered Accountants in England and Wales financial services faculty head Iain Coke.

The IASB has published a draft standard that represents the first of three phases of a comprehensive review of IAS 39 Financial Instruments: Recognition and Measurement.

The project was split into phases to meet demands from European banks and the EC for new classification and measurement rules in time for the preparation of 2009 year-end financial statements.

The other two phases, which address impairment methodology and hedge accounting, are scheduled for completion in 2010.

Comments on the phase one draft are due by 14 September, which is a shorter than the usual consultation period.

Coke said it will take stakeholders at least the two months scheduled for the consultation to assess the possible implications of the proposals.

These implications could then change when the proposals for the second and third stages of the IAS 39 review are published.

2009 application

Coke also questioned how practical it will be for anyone to apply the standard for this year end.

“You will need to restate last year’s information, so it will take companies some time to get the data and the information they need,” he said. “I think those who have been pushing for amendments will find it challenging to implement, they may run the risk that they need to adjust their accounting again so they ought to think carefully about whether early adoption is a good thing and consider both the short term implications and longer term ones.”

Despite the rushed process, Coke said it is still possible a robust, workable standard will emerge.

Mandatory application will not be before January 2012.

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