PracticeAuditUK companies to use ‘fair value’ method

UK companies to use 'fair value' method

The EU fair value directive, which allows companies to account for their debt securities and equities at market rates, may be permitted in the UK.

Link: Banks set for last ditch talks with IASB

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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