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Accountants in the UK are telling the European Commission that it may not have legal authority to give only limited approval for accounting rules on derivatives.

A legal challenge could be launched against the Commision. The Institute of Chartered Accountants in England and Wales issued its statement today.

European companies are to use the new International Account Standards from January 2005. The problem is IAS 39 which deals with derivatives. The measure allegedly makes for volatility in in financial statements.

The ICAEW warned of "long term damage to the credibility and quality of financial reporting in Europe."

French banks in particular have been pressing for only partial endorsement of IAS 39.

The result could be that Europe has insular accounting rules for a small, but growing element of the financial system. Hedge funds are currently the darlings of the financial markets.

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Keywords

IAS 39

Hedging

hedge funds

International Accounting Standards

IAS

2005

accountants

accounting

derivatives

volatility