IAS 39, Financial Instruments: Recognition and Measurement , first adopted in 1999, required companies using IASB standards to fair- value many financial instruments including derivatives. This standard moved the IASB accounting for financial instruments into substantial agreement with financial instrument standards in the United States. It is an example of the ongoing movement toward international harmonization of accounting standards.
However, IAS 39 met substantial opposition from the European Union, which required its members to adopt IASB standards effective in 2005. The opposition arose from concerns of European banks and insurance companies, which claimed that fair value accounting would introduce volatility into their financial statements. As a result, the European Union carved out the fair value option and hedging provisions of IAS 39, leaving it up to member states and individual firms to decide if they wanted to adopt them. The European Union was concerned about artificial volatility of earnings resulting from fair value accounting and the strict hedging provisions of IAS 39. It also felt that the IASB was following FASB standards too closely and thus ignoring the “Europeness” of risk management.
More recently, the European Union delayed acceptance of IFRS 9 following objections from certain banks and insurance companies that its relaxation of fair value accounting did not go far enough.

Required
a. Why would EU banks and insurance companies be concerned about financial statement volatility introduced by fair value accounting? Consider both the balance sheet and income statement in your answer.
b. As international harmonization of accounting standards has progressed, there have been suggestions for the SEC to accept either FASB or IASB standards for firms, including domestic firms, under its jurisdiction. What would the costs and benefits to firms and investors be if the SEC were to accept either FASB or IASB standards?
c. How might the EU carve- outs of IAS 39 and its delay in accepting IFRS 9 affect the likelihood that the SEC will allow U. S. companies to use either FASB or IASB standards?.