International standard setter publishes replacement for IAS39 in wake of banking crisis
The International Accounting Standard’s Board has released its contentious
fair value standard, ending one of the most controversial projects in its short
The new accounting rule, hastily revised and reworked in the wake of the
international financial crisis, aims at reducing the complexity of the fair
Fair value – the accounting principle which forces companies to value assets
at their every day market value – came under sustained attack in the immediate
wake of the financial crisis as banks and other financial institutions watched
on as the value of their financial instruments plummeted in severely depressed
The IASB, which already had plans to revise the standard, were forced to
accelerate their efforts to bring in a replacement, which was released today.
The board’s swift actions enjoyed broad support from a number of
international institutions and countries, however differences remain between its
approach to the rule those proposed by its counterpart in the US.
The diverging standards will be a challenge that will need to be overcome if
the world’s largest economy eventually decides to take on international
All eyes will now be fixed on Europe’s reaction to the accounting rule, with
recent signs suggesting there might be some reluctance to adopt the principle.
European Commission officials expressed fears in a letter to the IASB that
the fair value rule could add volatility to accounts.
If Europe rejects the IASB’s standards it would deal a major blow to
proponents of international standards and likely encourage American detractors
who already say the board is prone to political manipulation.
In a statement IASB chairman David Tweedie said he has delivered on his
promise and commitment made to the G20, who asked the board to review the
“Benefiting from unprecedented levels of consultation with stakeholders
around the world, the IASB has made significant changes in its initial proposals
to improve the standard, provide enhanced transparency and respond to
stakeholder concerns,” he said
Companies will now have the option to adopt the standard for their next set
of accounts. The rule will however become mandatory by 2012.
Read the full IASB statement:
completes first phase of financial instruments accounting reform