Last week’s attack on fair value rules by Swiss Holdings director Peter Baumgartner would appear for the uninitiated in this long-running debate to suggest growing opposition in banking circles.

But recent opinions suggest otherwise, indicating somewhat of a sea change with pro fair value voices now starting to make the headlines.

Investment bank Goldman Sachs this week said it ‘regards mark to market accounting as fairer and more sensible than the alternatives’.

Goldman Sachs’ report in favour of fair value comes hot on the heels of the bank’s threat to withdraw its membership of the International Institute of Finance. This came about after the IIF proposed scrapping the IASB’s fair value policies in favour of valuing illiquid assets using historical, rather than market prices, because its members were facing such huge writedowns stemming from the credit crisis.

Goldman Sachs dubbed the proposals as ‘Alice in Wonderland accounting’.

In its latest research the bank goes on to say ‘it is not very credible for financial institutions to argue that marking to market is inappropriate only during downturns.’

It adds: ‘If financial institutions apply fair value accounting rigorously, they should also be able to apply appropriate risk management techniques and rigour to their capital usage, and this should further help to limit their exposure to over-valued assets.’

This must come as a boon to standard setters at the IASB. Not that chairman Sir David Tweedie ever had any intention of backing down, but it must ease the pressure on the standard setter in regard to fair value. Sir David is nothing if not tenacious.

Baumgartner trotted out the now common criticism that ‘financial reporting is not reflecting business reality in many areas’.

Now the debate has shifted, the IASB, in conciliatory mode, has formed an expert advisory panel – which meets privately but provides a summary in IASB board meetings – to draft guidance on how to value assets in illiquid markets, which is what institutions are struggling with. Guidance is expected to be issued by September.

This week Yoshimi Watanabe, Japan’s minister for financial services, added weight to the acceptance of increased transparency when he said the experience of Japan’s banking sector could teach many lessons to the City and Wall Street as they struggle to cope with the credit crisis.

‘The right tools were needed to establish the true value of assets, rather than [doing what Japan did] and avoiding ever facing up to the problem,’ said Watanabe.

The banks that remain staunchly against fair value, and there are still many, are unlikely to win this fight, especially now that the credit crunch is looking more and more likely to turn into a recession. People want more transparency, not less.