RegulationAccounting StandardsIASB: ‘take writedowns on sub-prime’

IASB: 'take writedowns on sub-prime'

IASB vice-chairman says it is 'not acceptable' for banks to argue that instruments have become too complex to value

It is ‘not acceptable’ for banks to argue that debt instruments have become
too complex to value in the credit crunch, the International Accounting
Standards Board has said.

Tom Jones, the vice-chairman of the IASB, was quoted in the FT
today showing frustration at complaints that banks could not mark the
instruments to market, because there is no longer a market for them: ‘You need
fair value to get to the truth: the facts are the facts.’

‘The idea of people selling compound instruments, then saying they’re too
complex to value in a credit crunch – that’s not acceptable,’ he said. ‘People
[should] take the writedown now and, if markets come around again, they can mark
it up again.’

The credit crunch has proved a flashpoint in rows over fair value accounting.
Some have argued fair value
helped inflate the market
, while banks on Wall Street and elsewhere are now
wrestling with how to
value
the instruments
.

Further reading:

Fair
value: a fair cop?

Fair value fingered for
market crash

Mark-to-market
warning sounded

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