US and international standard setters to work on joint credit crisis solutions

Robert Herz, FASB chairman

A new high level advisory group is to be established by international standard setters along with their counterparts in the US in a bid to find a long term solution to accounting for financial instruments.

Accounting for securities and derivatives have become highly controversial during the credit crunch as banks suffered ever increasing writes down to their on the back of falling asset values.

Many have blamed fair value accounting for contributing to the financial crisis.

The European Commission is today expected to discuss further proposals that would allow banks to reclassify all financial asset classes as ‘held for investment’, thus avoiding a valuation under fair value principles.

The joint working announcement and commitment to a long term solution to accounting for financial instruments will be viewed as way of placating the European Commission and heading off the drive towards a carve out.

Joint work would also help maintain the two board’s drive towards convergence and US adoption of IFRS.

The IASB and FASB will use the new advisory group to counsel both standard setters on a route forward. It will meet in public and will include external chair persons and members. Public roundtables will also be staged in Europe, the US and Asia.

IASB chairman Sir David Tweedie said: ‘The establishment of this high level advisory group and the holding of public roundtables should ensure that both boards together reach common high-quality solutions that hep return confidence to the marketplace.’

Robert Herz, chairman of the FASB, said: ‘We expect this new global group to generate valuable short and longer-term input for both boards to consider.’