Jeroen Hooijer Esq Head of International Department Directorate ...

Jeroen Hooijer Esq
Head of International Department
Directorate-General Internal Market and Services
European Commission
B-1049 Brussels
Belgium
BY E-MAIL
Dear Mr Hooijer
Potential Amendments to IAS39 and IFRS7
21 October 2008
We understand that a meeting is to be held at short notice in Brussels today at which
representatives of the European Commission will discuss with a number of invited stakeholders
issues arising in relation to IAS39 and IFRS7 in the context of the ongoing turbulence in financial
markets.
We welcome the initiative taken by the Commission in gathering together concerned
stakeholders. However, it is our view that it would not be in the interests of Europe or the
global business community for the Commission to consider the adoption of further
European “carve-outs” or amendments to accounting standards issued by the IASB.
Who we are
The Hundred Group of Finance Directors represents the views of the finance directors of the UK’s
largest companies drawn largely, but not entirely, from the constituents of the FTSE100 Index.
Our members are the finance directors of companies whose market capitalisation collectively
represents over 80% of companies listed on the London Stock Exchange. Views expressed in
this letter are those of The Hundred Group of Finance Directors but are not necessarily those of
our individual members or their respective employers.
We must have a single version of IFRS
The Hundred Group had been consistent in its support for a single set of high quality international
accounting standards. Many of our members operate internationally and it would be of great
benefit to them to be able to apply a single set of accounting standards in all of their operations
around the world.
We believe that if a global accounting standard is to be achieved the IASB must retain the sole
authority to review, interpret and, where necessary, amend international accounting standards.
Otherwise, there is the danger that there will develop a number of regional “versions” of IFRS and
the potential benefits of a global standard will be lost.
We must consider the global constituency
As we understand it, the amendments to the reclassification rules within IAS39 were largely
brought about by political pressure from Europe. While these particular changes may suit
European interests, we believe that the manner in which this has been achieved has set a
potentially unwelcome precedent and may lead to future pressure by other regional interests for
changes that may not be so welcome in Europe.
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We would remind the Commission that the IASB has a global constituency. We believe that it is
vital that the views not only of Europe and the US are heard, but also those of other important
constituents such as China, India and Japan.
Due process must be followed
We believe that any amendment of IAS39 and IFRS7 must be dealt with through the IASB’s due
process. We therefore believe that the objective of today’s discussion should be to establish a
basis for advising the IASB of the concerns of its European constituents. We believe that the
IASB would respond constructively to those concerns.
We were concerned that the Commission Declaration on this matter issued on 15 October 2008
used phrases such as “The Commission will propose further amendments to IAS39 and IFRS7,
by all legal means if necessary…..” and “…..Member States want to have an in-depth reflection
on the standard-setting process” which led us to believe that the Commission may attempt to
force the IASB’s hand by threatening European carve-outs or amendments to these standards.
We would strongly recommend that the Commission avoid such a course of action. We believe
that such a move would encourage other regional variations from IFRS and may ultimately cause
the US to step back from permitting IFRS to be adopted by US companies.
While there are most certainly aspects of international accounting standards with which the
Hundred Group does not agree, we have consistently taken the view that the time to influence the
direction of accounting standards is during their development and that once they have been
issued by the IASB they should be accepted for use within the European Union without carve-out
or amendment. If subsequent amendments to international accounting standards are considered
necessary by constituents they should be pursued under the IASB’s due process.
We understand the need for prompt action in the current unprecedented economic conditions, but
we are concerned that if accounting standards are amended too hastily their quality may be
undermined. In this context, The Hundred Group welcomes the shortened 60-day comment
period on the IASB’s proposals issued last week on the improvement of disclosures surrounding
the use of fair values.
The IASB should be encouraged to take action
We believe that the IASB now has an opportunity to take the initiative. Rather than waiting to
hear the views of its constituents, we recommend that, as a matter of urgency, it goes out actively
to seek their views on the need for urgent change of IAS39 and IFRS7 in the context of the global
financial crisis. The review of these standards should take precedence over its convergence
projects.
We would also urge the IASB and the FASB to make a statement on how they intend to address
the accounting issues arising from the financial crisis following their joint meeting that concludes
today.
Please feel free to contact either myself or Mark Smith (msmith@tomkins.co.uk) if you would like
to discuss our comments.
Yours sincerely
Ashley Almanza
Chairman
The Hundred Group of Finance Directors
T: +44 (0) 118 929 3711
E: ashley.almanza@bg-group.com
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