The European Commission has refused to adopt a new standard on financial assets published by the International Accounting Standards Board (IASB).

IASB released its new standard, “IFRS 9 Financial Instruments,” on November 12 after calls from the G20 nations to simplify accounting in this area, which had been exposed during last year's financial crisis.

But a panel of experts that advises the Commission on accounting issues said it would not adopt the rule immediately. That means companies using International Financial Reporting Standards outside the 27-member European Union will be able to use the simplified accounting rule right away, while those inside are left in limbo.

IFRS 9 is just the first in a series of three new rules that IASB is producing to replace IAS 39 Financial Instruments: Recognition and Measurement. The European Financial Reporting Advisory Group, which advises the Commission, said it wanted time to consider all the outputs from the project and was “currently considering how it will proceed.”

IASB published proposals on the second part of the project, the impairment methodology for financial assets, at the start of November and is still working on its plans for the third part, which covers hedge accounting.

Earlier in November Jörgen Holmquist, director general of Internal Markets at the European Commission, wrote to IASB asking it to “urgently” consider further last-minute changes to IFRS 9, arguing that it “may not yet have struck the right balance between ‘fair value' accounting and ‘amortized cost' accounting.” Pressure from the Commission on the pace and direction of accounting reform nearly provoked IASB Chairman Sir David Tweedie to resign last year.

IASB said IFRS 9 would make it easier for investors to understand the accounting of financial assets and reduce complexity, which is what the G20 asked for. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the many different rules in IAS 39.

Adoption of the new standard is mandatory for companies outside the EU from Jan. 1, 2013, but IASB said early adoption is permitted for 2009 year-end financial statements.

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