US banks attack proposed accounting standards

US BANKS have attacked accounting standards proposed by the International Accounting Standards Board and its US equivalent, the FASB.

The proposed rules cover accounting for derivatives, and could force financial institutions to bring trillions of dollars worth of derivatives onto their balance sheets, Reuters reports.

Yesterday, the IASB and FASB release four new standards dealing with off balance sheet activities and fair value accounting, both of which impact upon the handling of derivatives in financial reporting.

Critics of the proposed guidelines warned the changes would exaggerate risks, forcing banks to report their full exposure for most derivatives on balance sheets, rather than net amounts.

Robert Traficanti, deputy controller at Citigroup, said: “The flawed offsetting model in the exposure draft will either obscure or create nonexistent risks which will ultimately mislead financial statement users.”

Related reading

Fiona Westwood of Smith and Williamson.