International Accounting Standard (IAS) 39, Financial Instruments: Recognition and Measurement, has attracted considerable controversy throughout its development. Major European financial institutions and political institutions lobbied heavily against the development of some of the provisions in the standard. Jacques Chirac, the French president, has suggested that the accounting treatment prescribed by IAS 39, threatening the stability of the European economic structure. Despite their efforts to accommodate the problem of voters, the International Accounting Standards Board refused to fully recognize the lobby pressure and implemented a compromise standard in March 2004. As a result, accounting EU Regulatory Committee voted to recommend to the European Commission only partially adopt IAS 39, effectively "carving out" two provisions that were the focus of discussions. Explores the history of IAS 39, IAS 39 describes the prescribed treatment and fair value of cash flow hedges, outlines much discussed issues related to the macro hedge accounting, and illustrates the influence of politics in accounting standard setting process. Also considers the implications of the European Commission's "alienation" on the viability of international accounting standards, and the main purpose of the section of global harmonization of financial reporting standards. "Hide
by Alan D. Jagolinzer, Christopher Armstrong Source: Stanford Graduate School of Business 14 pages. Publication Date: 01 May 2005. Prod. #: A191-PDF-ENG
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