The European Commission’s refusal to adopt a new International Financial Reporting Standard on financial instruments has provoked an angry reaction from parts of the trading bloc’s accounting profession.

The International Accounting Standards Board released “IFRS 9 Financial Instruments” on November 13 after calls from the G20 nations to simplify accounting in this area. But a panel of experts that advises the Commission on accounting issues said it would not decide whether to adopt the standard until it had seen how IASB plans to reform other aspects of accounting in this area. The experts said they were concerned that IASB had not struck the right balance between “fair value” and “amortized cost” accounting.

But Hugh Shields, chief economic adviser at the Institute of Chartered Accountants in Scotland, said the G20 had encouraged IASB to fast-track its reforms and a wide range of technical accounting experts had endorsed its proposals.

“There is an urgent need for the Commission to reconsider its decision to postpone adoption of IFRS 9,” he said. “The new standard is necessary to address some of the weaknesses in accounting for financial instruments which were highlighted during the financial crisis.”

Delaying the introduction of IFRS 9 would put European financial firms at a disadvantage to their international competitors, said Shields, adding: “In the current economic climate this decision is particularly unwelcome.”

Nigel Sleigh-Johnson, head of the financial reporting faculty at the Institute of Chartered Accountants in England and Wales, said the new standard was not perfect but IASB had met nearly all of the Commission’s demands and had produced something that would give meaningful information to investors.

"It is obvious that the ongoing debate around accounting for financial instruments and fair value will not disappear any time soon,” he said, “However, it is critical that we do not lose sight of the ultimate goal: one global set of accounting standards.”

He added: "Any delay in endorsement of the standard for use in the EU will create uncertainty in already uncertain times."

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