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