PracticeConsultingBanking sector attacks ASB plans

Banking sector attacks ASB plans

The banking industry has attacked accounting standard setters over radical proposals for a new standard on financial instruments which the British Bankers' Association claims could destabilise the sector.

Published today by the Accounting Standards Board, the proposals would force banks to measure their assets and liabilities using market values rather than historical cost, as they do now. The proposals have been put forward by a group of standard setters from ten countries.

Tim Sweeney, director general of the British Bankers’ Association, said: ‘If acted upon they have the potential to destabilise institutions within the sector and disrupt their ability to act as providers of long-term finance to industry and commerce. The standard setters are aware the banking industry considers these proposals to be substantially flawed. They have shown themselves insensitive to the concerns.’

If approved, the proposals would require listed companies to calculate the value of all financial instruments in the same way and show them at fair value on the balance sheet. Financial instruments include shares, bonds, debtors, creditors, deposit accounts, forward currency contracts, futures, swaps and other types of derivative contracts. The proposals reflect a trend among world standard setters to increase harmonisation, transparency and disclosure through calculations using market values.

ASB chairman Sir David Tweedie, said: ‘As many financial instruments are a contract for performance in the future, there is no present cost, so there is nothing to recognise in historical cost based accounting.

Yet the contract may quickly become a large asset or liability, meaning huge gains or losses can accumulate off-balance sheet and not be recognised until the contract is fulfilled.’

The BBA publishes its case against the proposals in the Bank of England’s Financial Stability Review, published today.

Links

ASB PUBLISHES JOINT INTERNATIONAL PAPER ON FINANCIAL INSTRUMENTS

ASB website

ASB PROPOSES CHANGES TO THE PER FORMANCE REPORTING STANDARD FRS 3

ASB ends year with more revised rules

ASB stands firm with new standard

PwC partner named ASB chairman

Related Articles

5 tips for SMEs to protect cash flow

Accounting Software 5 tips for SMEs to protect cash flow

5m Alia Shoaib, Reporter
Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

Consulting Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

11m Stephanie Wix, Writer
Managing partner Q&A - the year ahead: Richard Toone, CVR Global

Accounting Firms Managing partner Q&A - the year ahead: Richard Toone, CVR Global

12m Kevin Reed, Writer
Deloitte 'self-imposes exile' on government contracts to defuse PM row

Accounting Firms Deloitte 'self-imposes exile' on government contracts to defuse PM row

12m Kevin Reed, Writer
Managing partner Q&A - the year ahead: Julie Adams, Menzies

Accounting Firms Managing partner Q&A - the year ahead: Julie Adams, Menzies

12m Kevin Reed, Writer
Friday Afternoon Live: Deloitte's tech thing; PAC wants HMRC 'contingencies'; and Sports Direct

Business Regulation Friday Afternoon Live: Deloitte's tech thing; PAC wants HMRC 'contingencies'; and Sports Direct

1y Kevin Reed, Writer
Friday Afternoon Live: HMRC complaints rise; Deloitte scoops big audits; and corporate reporting woes

Audit Friday Afternoon Live: HMRC complaints rise; Deloitte scoops big audits; and corporate reporting woes

1y Kevin Reed, Writer
New head of equity capital markets for KPMG

Accounting Firms New head of equity capital markets for KPMG

1y Stephanie Wix, Writer