Lord George fears fair value jitters

Fair value accounting may exacerbate problems in already delicate markets,
the former governor of the
Bank of England
has warned.

As fears grow about the impact of new fair value rules in the US implemented
today, Lord Edward George voiced fears about the reaction of the markets to fair
value fluctuations.

‘My worry is that people might react in an instinctive way to particular
numbers and it could add to nervousness. And with all the debt that’s in the
market it could be tricky in this economy,’ Lord George said.

He said having a common set of reporting standards, so the markets could work
better, is in principle ‘absolutely right’, despite some people being less than
enthusiastic about the change. But the outcome of applying fair values will
produce great volatility, and ‘that’s a worry’.

‘People shouldn’t react to headline figures. The companies should explain why
the figures change so users can respond in an informed and balanced way’, he

‘What’s in my mind is that those that are using the accounts when they are
produced should understand what’s involved, as before fluctuations were smoothed
out,’ he said in an interview published in today’s Accountancy Age.

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