LARGE ACCOUNTING FIRMS’ SURVEY REVEALS EMERGENCE OF “TWO STANDARD” SYSTEM IN THE EUROPEAN UNION

Abstract

Abstract Convergence with International Financial Reporting Standards (IFRS) as promulgated by the International Accounting Standards Board (IASB) is receiving great attention. In 2005, all listed companies domiciled in the European Union (EU) will be required to prepare consolidated accounts based on IFRS. Individual EU member states are, however, permitted to decide whether IFRS will be required or allowed for non-listed companies or for listed companies’ individual accounts. Based primarily on data collected by the six largest international accounting firms during their most recent convergence survey, this paper examines each of the 15 EU member states’ convergence plans and their perceived barriers to convergence. The findings indicate that most EU members do not plan to converge national GAAP with IFRS, thereby highlighting the great significance of the large firms’ concerns regarding emergence of a “two-standard” system in the EU. The survey indicates the majority of EU countries will continue to require or allow national GAAP for individual accounts. While Belgium is considering requiring IFRS for all consolidated accounts, other EU countries have decided to allow or are considering allowing non-listed companies to prepare IFRS consolidated accounts. In most EU countries, the link between financial accounting and tax accounting represents a major barrier to convergence. Other frequently cited barriers include disagreement with certain IFRS and the complicated nature of certain IFRS. International requirements for financial instruments are viewed as particularly problematic.