The EU has postponed a decision on whether to endorse IFRS 9 Financial Instruments for use in Europe.  Although the mandatory date for adoption of IFRS 9 set by the IASB is 2013, voluntary use is permitted immediately.  However the EU decision or non-decision has effectively ruled out the possibility of European companies using the new simplified provisions in the December year-end accounts.  Some, such as Douglas Flint Group FD at HSBC, point out those European companies will be at a competitive disadvantage as a result.  However, I believe that the ultimate impact could be felt globally.

There is clearly a split within Europe and I don't believe that it is simply over these new financial instrument rules - it goes much deeper - there is resistance by some to accountancy rules being set for Europe by a body that is not 'controlled' by Europe. Accounting for Financial Instruments is just a convenient fighting ground. However, these tensions have existed before (previous IAS 39 carve-outs) and Europe has backed away from the brink - we need to work towards a similar outcome again and support the drive for global standards not European standards.

So what can be done?  One of the ways that the preparer community can assist here is to demonstrate that figures prepared under IFRS 9 are more relevant and reliable than those prepared under IAS 39.  Some banks say that they will be preparing these alternative figures for internal use and, in the circumstances; this seems to be good practice.  However, if companies truly believe that an IFRS 9 presentation is better they should be prepared to disclose the figures in their accounts alongside the 'EU-endorsed IFRS' figures - suitable labeled as ‘Non-GAAP'.  FDs can then use the narrative section to explain why the figures are different and more relevant.

This will clearly be more work and will increase still further the volume of disclosures but widespread reporting might just tip the balance towards acceptance of IFRS 9 when the EU next comes to consider it.  And don't forget non-acceptance of IFRS 9 by the EU will lead to Europe being out of step with other users of IFRS and will, almost certainly, lead to rejection of IFRS in the US.  Global standards will be dead in the water.

And why is this an issue?  Global standards are meant to ease access to global capital markets and increase comparability so reducing cost of capital.  Being proficient in a global standard will increase the international relevance of accounting experience so enhancing career prospects.  Subsidiaries of international groups would be less likely to maintain their books in local GAAP and so reduce the need for head office adjustments.  The list goes on.

We could all sit back keep our fingers crossed and hope for the best.  But when we end up with a European Standard-setter and a number of different GAAPs around the world then we might consider this to have not been the best course of action.  It is in the interests of all, not just here in Europe, that international standards succeed and to do so we must not be complacent.  I suggest that early adoption for those that can (i.e. outside of Europe) and the presentation of alternative figures in line with IFRS 9 by European companies is needed to build up a body of evidence that the EU finds irresistible when it comes to reconsider the endorsement of this standard.