In case you missed it on Saturday.
PRAGUE, April 3 (Reuters) - European Union finance ministers called on a global accounting standards setter on Friday to change one of its rules in line with a reform of its U.S. equivalent that sent bank share prices higher.
Accounting rules used in the EU are drawn up by an independent standards setter, the International Accounting Standards Board, which was not immediately available for comment.
It’s U.S. equivalent, the Financial Accounting Standards Board, on Thursday bowed to congressional and financial industry pressure by allowing more flexibility in valuing toxic assets, a move expected to boost bank earnings and improve their capital levels.
EU finance ministers discussed the fallout on Europe and agreed to request the IASB to address the issue.
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‘This issue has to be addressed immediately,’ EU Internal Market Commissioner, Charlie McCreevy, said.
While the IASB can be — and has been — criticised for its copycat history of its US counterpart, the FASB, there is a competitive issue here.
US banks reporting under FASB rules will have a bit more flexibility in terms of how they account for their assets following the approval of FAS 157-e. European ones will not. It’s sort of like the situation with Europe and quantitative easing. The ECB may be reluctant to pursue a course of QEasing because of the moral and inflationary hazards associated with the policy, but the decisions of other countries have effectively created an economic penalty (higher Euro) for not engaging in the practice. The same goes for accounting rules.
IASB meet rock and hard place. We expect you’ll become well-acquainted in the coming months.
Related links:
The international FAS 157-e – FT Alphaville