UK companies to use ‘fair value’ method

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This follows the government’s decision to launch a consultation to change the Companies Act to implement the European directive.

Traditionally financial instruments have had to be accounted for on the basis of their traditional historical cost. Implementation of a fair value directive would put the UK in line with IAS 39, issued by the International Accounting Standards Board.

Rather than making it a requirement, the government proposes that companies, including small companies, be permitted to use it.

Competition and consumer affairs minister Melanie Johnson said: ‘The Fair Value Directive is part of the European Union’s objective of enabling companies to use modern accounting practices that are consistent with International Accounting Standards.

‘Member States have a number of options as to how they implement thedirective. We have chosen a flexible, business-friendly approach.’

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