International Standards Causing a Stir

The new rules will be mandated by the European Union for an estimated 7,000 publicly traded companies.
Stephen TaubJuly 9, 2004

More than 27 percent of U.K.-listed companies expect “their key performance indicators,” including earnings per share, will be “negatively affected” by new accounting rules that go into effect in 2005, reported Bloomberg. The wire service cited a study by the Institute of Chartered Accountants in England and Wales (ICAEW).

“With only six months left until the introduction of International Accounting Standards, the clock is ticking loudly for listed companies,” said Eric Anstee, chief executive of the institute, in a speech at the ICAEW’s annual conference in London, according to the wire service.

Drawn up by the International Accounting Standards Board, the new rules will be mandated by the European Union for an estimated 7,000 publicly traded companies. According to Bloomberg, the ICAEW survey reported that 58 percent of U.K.-listed companies said they will be affected by the new standards. Of these, 23 percent expect the impact to be positive, 48 percent expect it to be negative, and 15 percent believe the results will be “very negative.”

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In one case — albeit from mainland Europe — the new rules could slice $1.35 billion from the capital base of BNP Paribas SA, France’s second-largest bank. Fixed assets and option costs, pension benefits, and adjustments on interest rates for home-savings plans would be revalued, the wire service pointed out, citing a report from Merrill Lynch.

In another report, the Financial Times reported that the European Commission is prepared to back Europe’s largest banks, which are trying to block new accounting standards on derivatives. Should the commission prevail, convergence of U.S. and international accounting standards could be in jeopardy, said the paper.

The commission is expected to endorse only part of the derivatives rules, known as IAS 39. It is also likely to seek a harder commitment to overhaul IAS 39 within 18 months, according to the FT.