Confusion threat to global fair value

Former Volvo CFO Jan Engström said a yet to be released consultation paper could attract criticism for being too complex.

He made the comments during debate on the IASB’s fair value exposure draft, a document aimed at gathering feedback on controversial standard IAS 39. ‘We’re adding complexity (and) I think we should think about how people will read this,’ he told the meeting.

In response, IASB chairman Sir David Tweedie said options had to be included in the paper to keep the consultation process fair and transparent. ‘I think we need to ask these questions,’ he said at the meeting.

The IASB is reviewing its controversial fair value standard, called IAS 39, which requires companies to value assets based on their present day value rather than their initial cost.

The standard has been criticised for exaggerating the effects of market downturns on balance sheets.

The board has come under pressure from European leaders to speed up its review, which culminated in a meeting of European finance ministers last month, when Sir David said he was on track to release a revised standard by years’ end.

At its meeting, the IASB also sought to assuage concerns about the implementation timetable for the revised IAS 39.

Board member Robert Garnett said companies could use the new standard for their 2009/10 accounts, but would not be forced to use the new standard until at least 2012.