The BBA and its member banks are supportive of the harmonisation of financial reporting and welcome the EU regulation requiring all listed companies in Europe to follow international accounting standards by 2005. We are, however, deeply concerned by key aspects of IAS 32 and IAS 39 and believe that the Board needs to accept that these standards are seriously flawed and require considerable further work. As a result of the amendments proposed by the exposure draft, we believe that few banks in the UK could implement IAS 39 within a reasonable time frame or at an acceptable cost. ??A number of the proposed changes to IAS 39, particularly the new requirements on impairment loss provisioning, radically reshape loan accounting in a way that is inconsistent with the principles underlying the standard and that is highly impractical. The exposure draft seems to introduce a new definition of cost that is closer to fair value and new text on the effective interest method mixes interest income with fees in an inappropriate way. We are very concerned about the introduction, in an exposure draft, of fundamental changes in the basis of measurement without prior consultation with the industry most affected.