EU targeted on accounting clarity

BRUSSELS (Reuters) - A push by global regulators to inject more clarity into company reports is being aimed at the European Union in particular, a top watchdog official said on Thursday.

"I think it's fair to say the EU is one of the areas where IFRS are being adopted but there are also a number of national carve-outs that seem to be appearing," Greg Tanzer, secretary general of the International Organisation of Securities Commissions said.

"It's particularly important that in the EU and in any other jurisdiction that applies carve-outs that a company discloses clearly what those carve-outs mean," Tanzer told a Reuters summit on regulation.

The EU's 8,000 listed companies must write their accounts using international financial reporting standards, or IFRS, used in over 100 countries.

The 27-nation bloc has a carve-out from one of the standards on hedge accounting, however, and accountants say up to 30 EU companies make use of this but do not make it clear in their interim and annual reports.

Market regulators worry investors may draw wrong conclusions when comparing companies by not knowing some firms use the carve-out but others do not.

Under the carve-out, a bank can value financial products held on its books at historic cost, or what it paid for them originally.

Without the carve-out a bank would have to value the products at what they are worth at the end of the reporting period, which mean a big loss when markets are volatile as now.

A study by the Institute of Chartered Accountants in England and Wales last year found that there was quite widespread use of the carve-out by smaller banks in the EU.  Continued...