The International Accounting Standards Board’s (IASB) proposed new rulebook for financial instruments accounting, International Financial Reporting Standard 9, Financial Instruments (IFRS 9), has cleared its last major hurdle in the European Parliament.

In a plenary session held on 6 October, the Parliament confirmed it would not veto IFRS 9.

The Parliament’s resolution instructs its president, Martin Schulz, to advise the European Commission that it has approved the new standard.

The IASB launched its project to develop IFRS 9 in 2009.

The move came in response to calls for the board to reduce complexity in financial reporting and also to fix impairment.

Critics of the board’s existing impairment rules argue that, because they measure incurred losses rather than an expected loss, they lead to too-little-too-late recognition of losses on impaired assets.

The 6 October vote was not, however, an unqualified endorsement of the new standard, which will replace International Accounting Standard 39, Financial Instruments: Recognition and Measurement.

In a strongly worded resolution, the Parliament reiterated the call of its Committee on Economic and Monetary Affairs for the ESRB to analyse the financial stability implications of the introduction of IFRS 9.

In September 2015, IPE reported that well-placed sources close to the issue had said they did not expect the Parliament to block IFRS 9 – despite recent sabre rattling.

In March, IPE revealed that ECB chairman Mario Draghi had conceded that the European Systemic Risk Board had yet to conduct an analysis of the financial stability implications of the new standard.

In a letter dated 29 February addressed to the Parliament’s ECON committee, Draghi wrote that the impact of IFRS 9 was as yet unknown.

A study by academics from Mannheim Business School subsequently endorsed the standard as an improvement over IAS 39.

In an email response dated 21 March, the authors of that report told IPE: “We agree the assessment of the full impact of IFRS 9 on individual banks, and the financial system as a whole, is not fully possible to simulate ex-ante.

“Note that, for an individual large bank, a team of 200-300 people will be involved in managing the transition process.

“So, even individual banks cannot assess the impact with full certainty, let alone the regulator, which would have to accumulate the information of all relevant banks under their supervision. This is simply not feasible given the data/systems currently in place.”

Meanwhile, German Green Party MEP Sven Giegold, a long-standing IFRS 9 critic, said this latest resolution showed the European Parliament was no longer prepared to rubber stamp accounting standards.

In a 29 September blog posting, he wrote: “The message of the MEPs is clear: Accounting standards are a public good.

“For the first time, the European Parliament does not simply rubber-stamp a new financial reporting standard but expresses concerns and demands follow-up action.”

Once formally adopted by the European Commission, IFRS 9 will apply for annual reporting periods beginning on or after 1 January 2018.