Europe to review accounting rules after investor criticism

Marion Dakers

EUROPEAN Commission plans to re-examine the use of International Financial Reporting Standards after growing criticism from the investment industry.

A group of investors wrote to Michel Barnier, the European commissioner for markets, to complain that the IFRS accounting rules obscure potential problems at banks by keeping loan losses off the books until they occur, even if they can be predicted.

Barnier’s cabinet head Olivier Guersent has written back to the investors to say the Commission “shared the concerns” and would kick off a review early this year.

The Local Authority Pension Fund Forum, which was one of the letter’s ten signatories, said it was “pleased that the investor group has been listened to by the Commission”.

“The group has identified systemically dangerous problems with IFRS. Overstating assets, hence capital and profits at the same time as leaving out liabilities as well. A double whammy,” said a spokesperson.

IFRS is used around the world, and was adopted by Europe in 2005.