Brussels, 05/11/2008 (Agence Europe) - On Wednesday 5 November, the European Commission approved the guidance on the application of fair value measurement when markets become inactive published at the end of October by the International Accounting Standards Board (IASB), which was charged with drawing up International Financial Reporting Standards (IFRS). The Commission considers the IASB position to be fully consistent with the joint statement issued by the 3 European committees of supervisors and with similar guidance recently issued by the relevant US bodies. “I welcome the IASB's guidance, which addresses key concerns expressed by European stakeholders. This guidance provides the clarifications needed by European companies to apply internal models to calculate the value of financial instruments for which active markets no longer exist. It is also consistent with the approach taken in the US, thus ensuring that a level playing field exists in the transatlantic capital market,” said Internal Market Commissioner Charlie McCreevy. Further clarification is expected on accounting methods for structured financial products which contain embedded derivatives.
In mid-October, the Commission amended accounting standards IAS 39 and IFRS 7 relating to financial instruments in force in the EU in response to the international financial crisis (see EUROPE 9763). These changes will allow listed European companies to give a more weighted reflection of the market value of their assets in their third quarter financial reports. The Commission has, since then, brought together the stakeholders to determine what other problems might arise from the application of the IAS 39 and IFRS 7 standards. During the meeting, the urgent need for further guidance on the application of fair value in inactive markets was expressed. This was provided by the IASB, taking into consideration that, when a market is inactive, transaction prices (or broker quotes) might be inputs when measuring fair value, but may not be determinate.
The Commission also announced that it had adopted a legislative proposal consolidating European rules on international accounting standards, bringing together all amendments to accounting legislation in one single text. The proposal may be found at: http: //eu.europa.eu/internal_market/accounting/docs/ias/20081104_ifrs_consolidated_en.pdf
(M.B./transl.rt)