Tweedie: US fair value not proving popular

Sir David Tweedie

The US fair-value model is not proving popular with the rest of the world,
according to the head of the international accounting standard setter.

International
Accounting Standards Board (IASB) chairman Sir David Tweedie said
his early soundings of the US fair value proposal have not revealed popular
support from countries outside the US.

“The US at present is exposing a full fair value. The rest of the world, from
my early soundings, don’t seem to want to buy into that,” he told
Accountancy Age.

In contrast, he said the international fair value rule released by the IASB,
was welcomed.

“The overwhelming reaction to IFRS 9 was, ‘well you got the cut about
right’,” said Sir David.

The fair value model ravaged banks balance sheets in the crisis, as asset
prices plummeted in falling markets. Banks were forced to measure their
loan-books at depressed market prices which obliterated much of their
balance-sheet value.

Accounting standard setters reviewed the standard, under pressure from
regulators and politicians, but there remains disagreement in US and abroad on
which model should now be used.

The US standard setter, the
Financial Accounting
Standards Board (FASB), is proposing a full fair value rule, which
may force US banks to value all their loans at market prices.

The IASB’s version, known as IFRS 9, uses a mixed-measurement model which
allows banks to value some loans at fair value and others at cost, depending on
whether they are held to maturity.

The standard is proving a major sticking point as the IASB and FASB attempt
to harmonise their two accounting codes.

For full details of Sir David’s interview, see Accountancy Age’s 9
September issue.

Further reading:

Bournemouth
professor takes swipe at IASB chairman

IASB
details recruitment process for Tweedie replacement

European
officials frustrated at “lack of transparency” over Tweedie
replacement