Charlie McCreevy, the European Union internal market commissioner, yesterday defended the introduction of controversial new accounting standards across the EU, but acknowledged that the move was "difficult, cumbersome and expensive" and that some standards required improvements.
Mr McCreevy said in a speech to the European Federation of Accountants last night in Brussels: "I know it's hurting, but I would like to reassure you that it will work and that the pain is well worth the gain."
But he acknowledged the growing criticism of the new international financial reporting standards (IFRS), introduced for listed companies in the EU earlier this year.
He said the new standards should bring more transparency, but conceded: "I know some accountants and users of financial statements are scratching their heads on whether this is the case. Many of the standards will be capable of being improved, and we should have a real debate about any fundamental issues which arise, where necessary."
A growing number of companies are expressing opposition to IFRS, which they say threatens to obscure true corporate performance. Discontent has focused on the extensive use of "fair value" measurements which can lead to misleading and unreliable profit figures, critics say.
Mr McCreevy said that it would be a "major challenge" to ensure consistent application of the new standards across the EU.
"We need consistency in the application of principles that investors and regulators can have confidence in the same high quality of IFRS accounts, whether they are prepared in Athens or Amsterdam," he said.
European securities regulators have already begun co-operation to reduce the risk of divergent IFRS enforcement, which would undermine its credibility. Mr McCreevy also struck a conciliatory note on the question of mutual recognition between IFRS and US standards.
At present, EU firms listed on American exchanges must go through the costly procedure of reconciling their accounts with the US Generally Accepted Accounting Principles (GAAP).
He said: "I understand some in the EU are saying that we must take reciprocal action, but we will not gain much by seeking short-term conflict. We need durable, long-term solutions." - (Financial Times Service)
