The European Financial Reporting Advisory Group (EFRAG) has published its proposed endorsement advice to the European Commission on IAS32 and IAS39, the accounting standards for financial instruments. Due to affect hedge accounting, among other things, the standards will influence the day to day workings of corporate treasury departments across Europe.
The EFRAG has unanimously endorsed IAS32 though recorded six dissenting votes for IAS39; issues on hedge accounting and demand deposits are apparently proving controversial. All the members agree that derivatives should be accountable at fair value though dissenters suggest an exception should exist where derivatives are used in connection with an effective hedge.
Stig Enevoldsen, chairman of EFRAG, commented: "There is clearly an urgent need for a standard on recognition and measurement of financial instruments in Europe. IAS39 has always been controversial but I believe our proposed advice shows clearly that there is general support for much of the standard and why there are still differences of view on hedge accounting and some related areas."
The EFRAG is a private initiative designed to support the implementation of IAS in Europe, composed of users, preparers and the accountancy profession, with a goal of offering pro-active assistance to the IASB.