CRITICS believe a number of European governments are having second thoughts about the adoption of full International Financial Reporting Standards, and the doubts are evidenced by moves to establish a parallel accounting system.

This is according to experts close to accounting standards, who said the evidence is mounting that a number of governments believe that switching to the global guidelines may have been too hasty.

A bill requiring companies to prepare accounts in both IFRS and UK GAAP is soon to be presented in the House of Commons; if it passes, it will mean some financial institutions are obliged to report in parallel, potentially indicating unease with IFRS.

Italy recently passed a ruling that all new IFRS standards have to be endorsed by the Ministry of Justice before being applied to company accounts.

By law, group accounts - prepared by corporates with multiple sub-divisions - must be prepared under IFRS, but the company accounts of individual entities may be reported according to Italian GAAP.

Officials said the endorsement is designed "to verify the compatibility of each newly published IFRS with the Italian accounting principles". Government interest stems from the fact that tax and dividend issues - which are of most interest to shareholders - apply to company rather than group accounts, and companies are subject to greater legal control.

France's standard setter, the ANC, has proposed a duel reporting system, in which listed companies prepare accounts under IFRS, while non-public entities stick to the national GAAP. This is in contrast to the UK's Accounting Standards Board, which recently ran a consultation on the transfer of SMEs to global standards.

One expert told Accountancy Age that these cases show the international model "is beginning to fall apart", arguing that post-crisis, the cracks in IFRS are starting to appear.

However, Kathryn Cearns, technical accountant at Herbert Smith, disagrees. Speaking of Italy's decision, she said: "There is nothing in it - all countries do it differently". Reserving the right to endorse new standards means that if one is presented that might cause a dividend block or skew the tax system, the ministry could pre-emptively decline it; "the government has the option to say no, but it's bureaucracy rather than anything else."

Critics say the global standards are out of step with national laws. Stella Fearnley, accounting professor at Bournemouth University, said the compatibility problems between IFRS and the Companies Act "have not been recognised quite as carefully as they should have been".

Further details on the bill forcing some UK companies to report in parallel are expected later this week.

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