The rulemakers for accounting matters are on course for a potential collision with the European commission over changes to reporting of partially-owned activities and off-balance sheet relationships.

The friction surrounding the matter has increased the potential of Brussels snubbing financial crisis-related reforms to accounting for a second time; in contrast other EU countries have already accepted the changes.

Last week, the International Accounting Standards Board refused a request  to delay the new rules, which decide when organisations need to consolidate partially-owned entities and how they account for joint ventures, as well as including crisis-related enhancements to the disclosure of activities that stay off-balance sheet.

The standards were originally due for listed companies in the EU as of January 2013, however, a year long delay has been requested by the European Financial Reporting Advisory Group, the body that plays an advisory role in the European Commissions decision to adopt or reject IASB rules.

The biggest issue the advisory group has relates to not enough time for companies to meet the deadline. Notable bank Barclays, backs the original deadline.

The group’s request for a delay received an interesting written response from Hans Hoogervorst, IASB chairman. He claimed he was “troubled” by the suggestion that some financial institutions were having difficulty preparing. “If they really do not know what activities they control it suggests that the reforms should be implemented sooner rather than later,” he said.

However, European reservations go to a deeper level than timing. France is questioning the substance of the new consolidation rules, which say a company can have de facto control of an entity while holding less than half of voting rights.

The European Commission said it was too early to take a final position on whether or not to endorse the new accounting standards, known as IFRS 10, 11 and 12.  (Source: Financial Times)

One senior accountant said there was a real risk of Brussels saying no, in the same way that it previously dramatically declined to endorse a key package of reforms governing loans and other financial instruments in 2009.