WASHINGTON, April 25 (Reuters) - The EU could ignore the International Accounting Standards board and set its own rules if the body does not respond quickly to a U.S. easing in fair-value accounting, a European Central Bank official said on Saturday.
The IASB, which sets mandatory accounting rules used in the European Union, on Friday ignored pleas from EU officials to loosen the rules. It said its guidance was already in line with changes announced this month by its U.S. counterpart the Financial Accounting Standards Board (FASB).
EU officials fear that if the IASB makes no immediate changes, banks in the 27-country bloc would be at a disadvantage to their U.S. peers and demanded a speedy response at a meeting earlier this month.
“What we can do is that Europe can very well reclaim its freedom,” said ECB governing council member Christian Noyer at a press conference on the sidelines of the spring meetings of the IMF and World Bank.
“It’s not the IASB that makes the law in Europe. If we decide to take back control and write the accounting rules in the European directive ourselves without following the IASB, the issue would be resolved. So it’s very simple.”
Fair value measures assets on company balance sheets by their market worth.
“A level playing field exists in this area,” the IASB said in a statement after a two-day board meeting.
French Economy Minister Christine Lagarde said she was very concerned about the IASB decision.
“It is also critical to me that there is the right level of commitment by all players and I‘m particularly concerned to see that the International Accounting Standards Board is not cooperating quickly and sufficiently enough,” she said.
The FASB issued two sets of new guidance, one of fair value measurement, the other on impairment of financial assets.
It said there was a need to improve guidance on when an asset is deemed to be impaired and thus trigger a writedown, but that this would be done within a broader and urgent review of the its fair value standard.
An immediate response to FASB’s new guidance on impaired assets was not necessary, the IASB said.
Banks have had to value some complex securitised products that have become untradeable, forcing them to make big writedowns, triggering the need to recapitalise at a tough time.
The IASB said to ensure consistency between it and the FASB rules, it would include relevant parts of FASB’s guidance in its consultation draft on fair value measurement to be published in May.
The IASB set a six-month timetable for drawing up a proposal to replace its fair-value rule, signalling it would not ditch the normal process to meet political demand.
Additional reporting by David Lawder, Editing by Chizu Nomiyama