European Union member-states voted yesterday to allow EU companies to make only partial use of a controversial accounting standard on derivatives from next year.
The decision could enable companies to opt out of tough hedge accounting rules in the international accounting standard on derivatives, known as IAS 39.
The stance, proposed by the European Commission, could also damage long-standing efforts to converge international and US accounting standards.
More than 7,000 EU companies will use the standards written by the International Accounting Standards Board (IASB), an independent body, from January.
Some European banks, notably in France, lobbied for changes to IAS 39, which is based on US accounting rules, because they claimed it could wreck their risk-management practices.
The EU accounting regulatory committee, made up of representatives from the 25 member-states, yesterday voted in Brussels by a qualified majority to allow companies to avoid some of the hedge accounting rules in IAS 39.
The decision means that member-states must choose whether to allow the opt-out arrangement, and could insist that their companies make full use of the rules.
It could result in European banks publishing markedly different sets of accounts.
US and UK regulators are disappointed at the EU stance, and accountants fear the row over IAS 39 has set a dangerous precedent.
The accountants say financial reporting rules should be written by independent standard-setters, free from political interference.
Brussels denied it had put accounting harmonisation in peril, but admitted its stance was "less than optimal".
European banks objected to how IAS 39 provokes strong volatility in accounts. At the EU accounting regulatory committee, the Czech Republic, Sweden, Denmark and Hungary voted against the Commission's plans.
