Barclays FD weighs in on accounting for debt

UNRESOLVED FLAWS in accounting standards mean banks are booking unrealised gains on their own debt, Barclays group finance director Chris Lucas has claimed.

IAS 39 sees banks mark down the value of their debt as their credit spreads widen and “this reporting of ‘own credit’ gains and losses is… widely viewed by the market as an accounting standard that misrepresents actual business profitability”, Lucas told The Financial Times.

Standard setter the IASB is working on new rules, but they are proving controversial and the task is further complicated by attempts to coordinate with US equivalent the FASB.

Lucas has urged stakeholders to amend IAS 39, saying this will “improve investor confidence and increase transparency in financial reporting by banks”.

Tim Bush, a member of standard setters advisory body the UITF, said: “Under the pre-IFRS model, the UITF was able to set standards within a month if necessary. The IASB’s timescale is so slow it is more like the period from Dunkirk to D-Day.”

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