Following recommendations made by the G20, the EBF is warning against the lack of coordination between the IASB and the Financial Accounting Standards Board which, it believes, is putting global convergence at risk.
The G-20 countries have made a number of recommendations that should be implemented to enhance accounting standards. Consequently, the International Accounting Standards Board (IASB) has undertaken a revision of the IAS 39.
The EBF also warns against the lack of coordination between the IASB and the Financial Accounting Standards Board (FASB). The latest current tentative decisions are inconsistent with the IASB approach, which the EBF feels is more appropriate. This inconsistency, the Federation says, is putting global convergence at risk.
In this revision process, the EBF supports the retention of the mixed measurement model as well as the reduction of measurement categories. However, the rationale for classification of financial instruments, it says, must reflect the business model of an entity and the economics behind financial transactions.
The EBF stresses that the risk management, the funding and the existence and depth of the market must also be taken into account. It firmly believes that the “business model‟ should be the primary criterion for the classification and measurement of a financial instrument, rather than basing this measurement on the characteristics of the instrument. Furthermore, reclassification should be mandatory where external or internal factors can force changes in the business model.
© EBF
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