Pleas to stop fair value carve-out for Europe

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Investors, accountants and regulators were anxiously awaiting news from
Brussels this week as the
once again debated whether to permit changes that would mean
financial instruments would not be subjected to a fair value calculation.

On the table were changes that would suspend paragraphs 9 and 50 of IAS39,
allowing the reclassification of derivatives to ‘held for investment’ and
avoiding fair value. The
IASB has already
moved to allow the reclassification of securities, in line with US rules.

The meeting, as Accountancy Age went to press on Tuesday, was
preceded by a raft of calls from investors insisting that the Commission leave
the standards alone and follow due diligence for setting standards.

It is understood that Gordon Brown favours leaving the International
Accounting Standards Board and its US counterpart,
FASB, alone to resolve the
accounting issues arising from the credit crisis.

The IASB and FASB attempted to head off unilateral action by the Commission
with a statement on Monday saying they would jointly create a high-level
advisory group to work on long-term solutions for financial instrument
accounting. They believe the group would provide a ‘global’ solution for a
global crisis, in contrast to the Commission’s Europe-only proposals.

Such a move would also underpin work since 2005 to converge accounting so
that the US can fully adopt international standards.

In advance of the EC meeting, the
Financial Reporting Council
hosted a gathering of interest groups last Friday, who were described as
unanimously opposed to a carve out.

A letter from the
Association of British
said: ‘It should not be carved out unilaterally for Europe, and in
a rush, even in the face of market turmoil. Further, even changes intended to be
temporary should be resisted ­ they are likely to become permanent and have
long- lasting, unintended consequences.’

The Investment
Management Association
said: ‘Investors worldwide need one set of financial
reporting requirements, not many variations. Undoubtedly the current credit
crisis requires rapid measures by governments and regulators. However,
fundamental changes in accounting should be implemented only after due process
and the involvement of all stakeholders.

FRC chief executive Paul Boyle said: ‘You are most likely to get the best
decision from an independent standard setting board using due process. Much more
so than if decisions are handled at a political level.’

If the EC does push ahead with a carve-out it could leave the IASB standing
by the standards as they currently exist, creating a power struggle over who has
authority on accounting.

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Fiona Westwood of Smith and Williamson.