Clarifications regarding the accounting standard to be followed
Could you please clarify which accounting standard is to be followed as regards observed agents which are foreign branches of non-resident credit institutions (i.e. credit institutions that are not resident in reporting Member States)?
The accounting standard that is applied by foreign branches of credit institutions need not be the same as the accounting standard of the legal entity to which the foreign branch belongs. For example, banking laws in some reporting Member States prescribe that, at an unconsolidated (solo) level, the national GAAP have to be applied. This provision is also applicable to foreign branches, resident in such Member States, of credit institutions resident in any other country (irrespective of whether or not it is a reporting Member State), which means that the foreign branches apply the national GAAP of the reporting Member State even if the legal entity of which they form part and which is resident in another country applies IFRS at an unconsolidated level.
Notably, the accounting standard not only determines which instruments are assigned to which accounting portfolios, but also provides other relevant rules in accordance with which the instrument is recognised in the balance sheet, the carrying amount is established, etc.
Consequently, in order to ensure that AnaCredit data of observed agents relating to the same reporting agent are reported according to the same accounting standard, the AnaCredit Regulation requires that the data be reported following the accounting standard of the observed agent’s legal entity (see Section 5.1.1 and Section 14.4.23 in Part II of the Manual).
However, it should be clarified that when the observed agent is a foreign branch resident in a reporting Member State of a credit institution non-resident in a reporting Member State, the applicable accounting standard is the accounting standard applied by the observed agent in the country where it is resident, rather than the accounting standard applied by the legal entity to which the foreign branch belongs.