US fair value clarification in tune with international standards as board considers asset reclassification and anti abuse measures
Accountancy Age, 03 Oct 2008
The international accounting standard setter has said statements made on fair value in the US do not amend the now controversial rule but offer guidance on using fair value in illiquid markets.
Observers will interpret the statement as saying that fair value principles remain in tact and no significantly undermined.
A fresh commitment has also been made to any study of accounting in the current financial crisis.
The board said it would also examine whether US standards that allow assets, in rare circumstances, to be reclassified so they escape a fair value principles are consistent with international standards and whether the US practice should be adopted. Discussion is due at a public meeting in mid October.
The need for anti abuse measures will also be on the agenda.
The remarks come after the US financial watchdog and standard setter made statements which some have seen as a relaxation of fair value/mark to market accounting while others have viewed it as a reaffirmation of its core principles.
We will continue to ensure that any IFRS guidance on fair value measurement is consistent with the clarification that has been provided by the US SEC staff and the FASB staff
Sir David Tweedie
There has been intense political pressure in Washington and Europe calling for a suspension of mark to market accounting. Even shadow chancellor George Osborne called for a 3 month hiatus at the Tory part conference this week.
The IASB believes the US statement remains consistent with IAS39, one of the key international standards for valuing financial instruments that embodies the principles of fair value.
Sir David Tweedie, IASB chairman said: ‘The IASB is committed to doing its part in responding to the credit crisis and recognises the need to provide additional and needed guidance on determining the fair value of financial instruments in illiquid markets. The SEC-FASB staff clarification on fair value accounting is a useful contribution, and our staff believes that it is consistent with IFRSs.
‘We will continue to ensure that any IFRS guidance on fair value measurement is consistent with the clarification that has been provided by the US SEC staff and the FASB staff.’
The IASB has a project underway reviewing IAS39.
Tomorrow French president Nicholas Sarkozy will propose suspending the use of mark to market in Europe at a summit of European leaders. The US rescue plan going through the House of Representatives also includes a provision reaffirming the right of Securities and Exchange Commission to dump mark to market.
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