European investment funds shun IFRS

Despite the G-20’s call for high-quality global accounting standards, the European investment fund industry is proving slow to adopt International Financial Reporting Standards (IFRS), according to survey by Ernst & Young.

A poll of leading fund managers, administrators and supervisors in 44 European countries found that just a fifth of the funds and administrators that currently have the option to apply IFRS do so. A further 22% of managers and administrators choose to use a combination of IFRS and other accounting standards, such as local Generally Agreed Accounting Principles (GAAP) or US GAAP.

But despite the low take-up of IFRS across Europe, the research found that 48% of managers and administrators believe that conversion had significantly improved the quality of financial reporting.

The survey also found that almost three-quarters of managers and administrators polled believe that IFRS will eventually become the European accounting standard for investment funds, but only 17% believe it will be mandated in the near future. Nearly four-fifths of local supervisors polled anticipate that the use of alternative GAAP will continue for some time.

Joost Hendriks, Ernst & Young’s assurance asset management leader for Europe, Middle East, India and Africa, believes that a reporting standard that combines US GAAP and IFRS seems the ‘most logical solution’ for the industry.

‘Investment funds look for harmonisation across products, regulations and internal structures, yet this does not currently extend to their financial reporting. This, and IFRS in particular, seems to be a logical next step on the road to harmonization,’ Hendriks argued.