European Commission welcomes IASB compromise

The European Commission has welcomed yesterday’s International Accounting Standards Board decision to try to allow for ‘macro-hedging’ as part of proposed new accounting standards, due to come into place in 2005.

“The Commission has throughout this process strongly urged both the IASB and representatives of the banking and insurance industries to work together towards an acceptable solution on IAS 32 and 39. Perhaps we are now beginning to see the fruits of that co-operation,” said the Commission.

The European Commission has to endorse the new accounting rules for use by European Union-listed companies by 2005. It therefore wants banks and standard setters to reach a consensus on the new rules as soon as possible.

“We welcome any progress made and continue to encourage all sides to seek a consensus on any outstanding problems. We hope that new draft standards can be swiftly presented,” added the Commission.

Macro-hedging is, broadly, the use of a single derivative to hedge a number of positions, as opposed to hedging one-to-one. The IASB, following roundtable discussions with financial institutions in March, has proposed that macro-hedging be applied under certain limiting circumstances.