Prudential FD Philip Broadley backs fair value accounting
The fair value accounting method has been backed by Prudential despite strong
opposition to the system from fellow insurers Axa and American International
Fair value accounting requires companies to disclose asset value at current
market prices and has been blamed by some insurers for worsening turmoil in
financial markets, the FT reports.
But Philip Broadley, the Pru’s departing finance director, backed the rules.
‘It seems to me, from conversations with users of accounts, that the balance
of opinion is in favour of fair value,’ Broadley said.
He acknowledged that fair value was imperfect, especially for insurers who
held assets to back long-term liabilties, but said that the users of accounts
preferred ‘observable market data’ to management estimates.
Broadley was speaking as Prudential reported a fall in profits from £2.2bn
and £1.1bn on an IFRS basis for the 2007 financial year, with credit writedowns
contributing to the dip in profits.