New Financial Instrument Standard released by IASB in response to call by G20 but will it be endorsed by the EU?

Radical overhauling and simplification of the financial instrument standard

Significant push back by certain EU member states on fair value rules

There have been significant criticisms of mark to market accounting and impairment rules and their pro-cyclical impact. As a result, the G20 demanded that the International Accounting Standards Board (IASB) replace the controversial financial instrument standard within the year. The IASB have responded to this call with their three stage project to replace IAS 39 with a new and improved standard. Today saw the much anticipated release of the first stage – a new standard on classification and measurement, IFRS 9.

Commenting on the new standard on classification and measurement, Glenn Gillard, Partner at Deloitte, commented:

“This process has been a radical change from how accounting standards have been set to date. The IASB, in a very short timeframe, have effectively toured the world with the proposals on the standard to ensure that every voice has been heard and all concerns raised. Using new technology, such as webcasts, has meant an active dialogue and feedback as the standard has developed. As a result, the original draft of the standard released in June has been significantly overhauled and has been amended for many of the concerns initially raised.”

However, not everyone has been won over by the new proposals which still require entities to carry many financial instruments at fair value. There is still a significant battle to get the new standard endorsed by the European Union which is due to happen before the year end so companies can use the new standard.

Commenting on EU endorsement Glenn Gillard notes: “The previous standard nearly brought the European IFRS project to a halt and was only saved by a specific European carve out. Any similar difficulties could put the global IFRS convergence project in doubt and be a major set-back in bringing the US onto IFRS.”

For Further Information Please Contact

Carol Donaghy
Murray Consultants
01 498 0304
cdonaghy@murrayconsult.ie

Claire Quinn
Deloitte
01 417 2356
cquinn@deloitte.ie

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