US and international accounting authorities have taken small tentative steps
towards agreement on fair value.
The International Accounting Standards Board (IASB) and its US counterpart,
the Financial Accounting Standards Board (FASB) have reached initial agreement
on a number of issues surrounding the contentious fair value standard.
The fair value measurement is used to measure the value of assets based on
their market price. The standard amplified the effect of the down turn as
financial assets lost value in illiquid markets.
FASB has indicated it would like to apply fair value to all assets. The IASB
disagrees and last year released a standard which allowed assets such as banks’
loan books to be valued at amortized cost.
The difference of opinion posed a challenege to both boards as they converged
their two competing standards.
The largely technical agreements so far show the two boards are making
tentative progress towards an agreed converged fair value rule, however there
remains differences to be ironed out in March.
The board have “tentatively decided” a fair value measurement of a
non-financial asset should take into account its highest and best use and that
the concept of highest and best use, and of valuation premise, are relevant only
for non-financial assets and are not relevant for financial assets or for
The boards also tentatively agreed that additional guidance for measuring the
fair value of difficult to value assets and liabilities should not be included
within the final converged fair value standard.
OF BOARD DECISIONS
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