The International Accounting Standards Board has published draft guidance on one of the most controversial issues in financial reporting – 'fair value' accounting rules.

The proposals incorporate recent guidance on fair value measurement published by the US Financial Accounting Standards Board and are consistent with a report of the IASB’s Expert Advisory Panel published in October 2008 on fair value measurement in illiquid markets.

Fair value rules, also known as 'mark to market', requires banks to value financial assets at current market rates. Critics have blamed fair value for exacerbating the multi-billion losses in the banking industry, while the rules have been watered down in the US.

Sir David Tweedie, Chairman of the IASB, said: 'This exposure draft is an important milestone in our response to the global financial crisis. It proposes clear and consistent guidance for the measurement of fair value and also addresses valuation issues arising in markets that have become inactive.'

Further reading:

IASB draft guidance