US financial lobby fights fair value proposal

One of America’s most powerful financial lobbies has attacked proposed
accounting measure rules which they say injects “craziness” into financial

The American Banking Association, which represents the $13 trillion US
banking industry, has urged its members to fight proposed fair value rules put
forward by the US accounting standard setter, the Financial Accounting Standards
Board (FASB).

FASB’s proposal would force banks to measure their loans at current market
prices, which banks argue would promote volatility and is not appropriate for
loans held to maturity.

“This is really a jaw-dropping proposal,” Donna Fisher, senior vice president
of tax and accounting at the Association told

The international fair value model allows banks’ to measure their assets
differently, depending on their purpose. Loans that are held for trading have to
be measured at their market price. Loans held to their maturity date are
measured at amortised cost.

According to FASB, their proposals provided more useful information to

“The objective…is to provide financial statement users with a more timely,
transparent, and representative depiction of an entity’s exposure to risk from
financial instruments,” FASB said.

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Fiona Westwood of Smith and Williamson.