IMA urges the European Commission to defer the introduction of IFRS 8

IMA URGES THE EUROPEAN COMMISSION TO DEFER THE INTRODUCTION OF IFRS 8 - OPERATING SEGMENTS

The Investment Management Association (IMA) has written to the European Commission asking it to defer adopting the International Accounting Standards Board's IFRS 8˛.

International Financial Reporting Standards (IFRS) have been the subject of much debate recently due to moves to converge international and US accounting standards. In introducing IFRS 8, which is based on the US's equivalent standard, the EU is converging requirements for the disclosure of segmental information with those of the US, at a time when there are still unresolved issues with the converged US/IFRS framework following the IASB's discussion paper on the conceptual frameworkł last year.

Furthermore, one of the main aims of converging IFRS with US Generally Accepted Accounting Principles (GAAP) is to eliminate the need for the burdensome US GAAP/IFRS reconciliation that companies with a joint listing in both America and another country are required to prepare at great cost. However, as IFRS 8 only relates to disclosures in the notes, it does not impact on this.

Liz Murrall, Senior Corporate Governance Adviser of the IMA commented:

"IMA does not consider that converging requirements for segmental disclosures should be a high priority for the Commission. In adopting IFRS 8, the Commission would be rushing ahead with an unnecessary and imperfect standard. We urge the Commission to take on board our concerns and hold off introducing IFRS 8 until there is more of a consensus about the converged framework."

A copy of IMA's response is attached.

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For further information, please contact:
Helen Stephenson, Communications Officer, IMA, 020 7831 0898

Notes to Editors:

IMA is the trade body representing the UK asset management industry. IMA's members have an interest in accounting standards as major investors in companies whose securities are traded on regulated markets. As users of financial statements and in the interests of ensuring consistency and transparency of accounts internationally, in principle, IMA members support the convergence of accounting standards internationally.

IFRS 8 operating segments is based a US standard called SFAS 131. It requires companies to report financial and descriptive information about their "reportable segments". IFRS 8 adopts the ‘management approach' to reporting operating segments as opposed to one based on an economic or geographical entity, which has been usual in UK accounts. Thus, the information to be reported is what management uses internally for evaluating segment performance and deciding how to allocate resources. Such information may be different from what is used to prepare the income statement and balance sheet. The IFRS therefore requires explanations of the basis on which the segment information is prepared and reconciliations to the amounts recognised in the income statement and balance sheet.

In 2006 the International Accounting Standards Board issued a discussion paper on a converged IFRS/GAAP conceptual framework for the preparation and presentation of financial statements. This received much criticism and at the present time the proposed underlying framework remains uncertain. Until these issues are resolved, IMA considers it inappropriate for the EU to adopt a US standard unilaterally.