Under Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards, companies governed by the law of an EU member state, whose securities are admitted to trading on a regulated market in any EU member state, must prepare their consolidated accounts in conformity with international accounting standards (IAS) adopted by the European Commission under the Regulation. Under UK law implementing an option in the Regulation such companies may prepare their individual accounts, and other companies may prepare either individual or consolidated accounts in accordance with EC adopted IAS.
Under Commission Regulation (EC) No 1725/2003, IAS 39 (financial instruments: recognition and measurement) and IFRS 7 (financial instruments: disclosure) were adopted. That Commission Regulation was amended on 15 October 2008 by Commission Regulation (EC) No 1004/2008.
International Accounting Standard 39, International Financial Reporting Standard 7 and Reclassification of Financial Assets (Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures) are all published by the International Accounting Standards Board and the EU.
UK companies which do not prepare their accounts in accordance with EC adopted IAS must do so in accordance with the provisions of the Companies Act 2006 (previously the Companies Act 1985) and regulations made under it. Those provisions implement the following EC Directives which contain valuation rules, including valuation on a mark to market basis:
Council Directive 78/660/EEC on the annual accounts of certain types of company
Council Directive 83/349/EEC on consolidated accounts
Council Directive 86/63 5/EEC on the annual and consolidated accounts of banks and other financial institutions
Council Directive 91/674/EEC on the annual and consolidated accounts of insurance undertakings.
UK companies which do not prepare their accounts in accordance with EC adopted IAS must do so in accordance with the provisions of the Companies Act 2006 (previously the Companies Act 1985) and Regulations made under it. Such companies will follow UK accounting standards. The UK accounting standards covering Financial Instruments, i.e. FRS 26 (IAS 39) Financial Instruments: recognition and measurement and FRS 29 Financial Instruments: disclosures, are fully converged with their BFRS equivalents, and so there should be little difference in the accounting treatment of these items in company financial statements for UK companies using UK GAAP or IFRS.