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Accounting for financial instruments: A comparison of European companies’ practices with IAS 32 and IAS 39

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  • Patrícia Teixeira Lopes

    ()
    (University of Porto, Faculty of Economics, Portugal)

  • Lúcia Lima Rodrigues

    ()
    (School of Management and Economics, University of Minho, Portugal)

Abstract

This paper analyses accounting for financial instruments of STOXX 50 companies and compare them to the requirements of IAS 32 and IAS 39, before IFRS are mandatory in the European Union. We use a list of 120 categories of inquiry and 370 possible responses and analyse companies’ annual reports. The results show that the majority of companies disclose the fair value amounts and methods of calculation but the information is neither clear nor objective, preventing the fair value information from being relevant and useful. We conclude that companies have a long way to go in terms of accounting and disclosure of financial instruments, namely derivatives. The mandatory adoption of more stringent standards such as the IAS 32 and IAS 39 may improve the information disclosed by companies. Doubts about the compliance degree and the usefulness of the information still remain. This paper brings new perspectives to the challenges of IAS/IFRS adoption, namely to what relates to fair value measurement.

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File URL: http://www.fep.up.pt/investigacao/workingpapers/07.03.07_WP239_LopesRodrigues.pdf
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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 239.

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Length: 26 pages
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:por:fepwps:239

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Keywords: Accounting for financial instruments; Fair value accounting; International Accounting; Accounting harmonisation; IAS/IFRS; STOXX 50;

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  1. Geoffrey Whittington, 2005. "The adoption of International Accounting Standards in the European Union," European Accounting Review, Taylor & Francis Journals, Taylor & Francis Journals, vol. 14(1), pages 127-153.
  2. Katherine Schipper, 2005. "The introduction of International Accounting Standards in Europe: Implications for international convergence," European Accounting Review, Taylor & Francis Journals, Taylor & Francis Journals, vol. 14(1), pages 101-126.
  3. Margaret Woods & David Marginson, 2004. "Accounting for derivatives: An evaluation of reporting practice by UK banks," European Accounting Review, Taylor & Francis Journals, Taylor & Francis Journals, vol. 13(2), pages 373-390.
  4. FFF1Jitka NNN1Rychtarikova, 2004. "The case of the Czech Republic," Demographic Research Special Collections, Max Planck Institute for Demographic Research, Rostock, Germany, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 2(5), pages 105-138, April.
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