Call to arms over fair value plan.

Concerns are mounting that small privately-owned companies will be hit by complex plans to measure all financial instruments at fair value.

Moves to make companies measure financial instruments such as derivatives, loans, options and swaps at fair value have been on the agenda in the UK for the last seven years, despite growing resistance from banks and insurance companies.

It means that instead of just showing the profit gained when, for example, a derivative is sold, companies will have to book gains and losses every year.

Danielle Stewart, small practitioner and member of the ICAEW’s working party on financial instruments, this week issued a call to arms to ensure accountants were aware of the implications of such a move for owner-managed companies.

‘Even the most technically minded accountants find (fair value accounting rules) difficult,’ she told Accountancy Age. ‘How is the average owner-managed company meant to understand?’

She added: ‘Our concerns are over the scope of the proposals. For owner-managed businesses we want (financial instruments) measured at historical cost.’

The US, Canada and the global standards-setter already have fair value accounting rules.

More on this issue at www.accountancy

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