EU report: international accounting rules did not worsen 2008 crisis 

The European Commission said on Friday there was no clear evidence that adopting international accounting rules made the bloc’s banking crisis worse and that its benefits outweighed the costs.

The independent International Accounting Standards Board (IASB) rules replaced a patchwork of national regulations 10 years ago for the 8,000 listed EU companies, with the aim of increasing transparency and comparability for investors.

Critics say the new rules, which the Commission implemented in 2005, deepened the 2007-09 crisis in the 28-country bloc because banks were allowed to make provisions for bad loans too late. These rules have now been changed worldwide.

However, the report said that users believed that the European Union should have more input and influence earlier in the process of developing standards and that the IASB had provided only limited analysis of the effects of its standards.

The report did say though that the rules had increased transparency of financial statements, improved accounting quality and led to higher liquidity and lower costs of capital.

“Overall, the evidence from the evaluation showed that the benefits of the implementation … outweigh the costs,” it said.

This will come as a relief for the IASB, a private entity that has come in for criticism in the European Parliament over what it sees as too little public accountability.

Michel Prada, chairman of the IASB‘s board of trustees welcomed the “positive and constructive conclusions”.

The Financial Reporting Council, which polices accounting in Britain, said it welcomed the report’s suggestion for a simpler set of book-keeping rules for smaller firms.

More than 100 countries use IASB rules and the report expressed disappointment that the United States has not adopted them.

The ICAEW, an accounting industry body, said the report was a “watershed” for IASB rules globally by concluding they are a good thing for Europe.

Source: Reuters –  EU report: international accounting rules did not worsen 2008 crisis

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