Due to the current International economic scenario, the European Commission has published in the Official Journal of the European Union on October 16th, some amendments on Regulation (EC) Nº 1725/2003 adopting certain international accounting standards, in accordance with Regulation (EC) Nº 1606/2002 of the European Parliament and of the Council as regards International Accounting Standard (IAS) 39 and International Financial Reporting Standard (IFRS) 7.

The International Accounting Standards Board (IASB) adopted on October 13th 2008, some amendments to international accounting standard (IAS) 39 “financial instruments: recognition and measurement”, and international financial reporting standard (IFRS) 7 “financial instruments: disclosures”. The IAS Regulation 1606/2002, places an obligation on European companies whose securities are admitted to trading on a regulated market in the EU to prepare their consolidated accounts, as of 1 January 2005, in conformity with IAS/IFRS  and SIC/IFRIC issued by the International Accounting Standards Board (IASB) and endorsed by the EU.

The amendments to IAS 39 and IFRS 7 allow the reclassification of certain financial instruments out of the category ‘held-for-trading’ in rare circumstances. The current financial crisis is considered to be such a rare circumstance which would justify the use of this possibility by companies.

In the context of the current financial turmoil, and considering the fact that certain financial instruments are no longer traded or related markets have become inactive or distressed, the Commission has considered the need to give immediate effect to the amendments allowing for reclassification of certain financial instruments.

In accordance with these amendments to IAS 39 and IFRS 7, companies should be allowed to reclassify certain financial instruments as from July 1st, 2008.

The proposals form IASB to improve the information available to investors and others about fair value measurements of financial instruments and liquidity risk, respond to the credit crisis and follow recommendations of the Financial Stability Forum, which had the support of the Group of Seven (G-7) Finance Ministers.

These amendments are the latest in a series of steps that the IASB has undertaken to respond to the credit crisis. The IASB has worked with a number of other regional and international bodies, including the Financial Stability Forum (FSF), to address financial reporting issues associated with the credit crisis. In responding to the crisis, the IASB notes the concern expressed by EU leaders and finance ministers through the ECOFIN Council to ensure that ‘European financial institutions are not disadvantaged vis-à-vis their international competitors in terms of accounting rules and of their interpretation.’

The consultation with the Technical Expert Group (TEG) of the European Financial Reporting Advisory Group (EFRAG) confirms that these amendments meet the technical criteria for adoption, and the Standards Advice Review Group, set up to advise the Commission on the objectivity and
neutrality of EFRAG’s opinions, advised the European Commission that this decision it is well-balanced and objective.

This Regulation consequently should enter into force as a matter of urgency.