IASB release fair value draft

The International Accounting Standards Board has released its draft for controversial accounting rule IAS 39 which came under fire for exaggerating the effects of the financial crisis.

The exposure draft promises to `answer concerns raised by interested parties during the financial crisis' and significantly reduce complexity in the classification and measurement of financial assets.

IASB chairman Sir David Tweedie described the release as an important first step towards providing investors with a better understanding of financial instruments.

`The financial crisis has demonstrated that investors need to be given a better understanding of information presented in the financial statements about financial instruments held or issued by a company,' he said.

`Making it easier for investors to understand financial statements is an essential ingredient to the recovery of investor confidence.'

European finance ministers have been eagerly anticipating the exposure draft after in part blaming IAS 39 for exacerbating the effects of the global down turn.

The exposure draft introduces two categories for the classification of assets: amortised cost and fair value.

If the draft is adopted users will have to take into account whether a financial instrument has basic loan features or is managed on a contractual yield basis before classification.

The IASB said a new standard will be available for non-mandatory use for 2009 year-end financial statements.

To view or comment on the exposure draft visit: www.iasb.org