RegulationAccounting StandardsOn the money with Gavin Hinks

On the money with Gavin Hinks

So the International Accounting Standards Board has begun its review of IAS39, fair value/marking to market accounting

Gavin Hinks, AccountancyAge

But if you thought chairman Sir David Tweedie had escaped pressure to soothe
those suffering from the credit crunch, think again.

Here’s a choice quote from Paul De Grauwe, professor of economics at the
University of Leuven. ‘Today the accounting rule of marking to market is driving
us at high speed into the abyss,’ he wrote in the Financial Times last week.

The abyss? That’s some language. And the reference to doom and destruction is
calculated to support his demand that we temporarily suspend marking to market.

He’s not alone. James Dancy of AIC Investment Services, has insisted that
fair value accounting can provide neither transparent or complete information.
In the FT, he asks for standard setters to ‘poke their heads out of the library
and walk down Main Street from time to time’.

And Martin Sullivan, CEO of insurer American International Group, called for
a short-term fix while the credit crunch is dealt with following the company’s
own $11bn writedown.

Banking analysts, including US ‘firebrand’ Christopher Whalen, have also
argued that the massive writedowns would have been much less in the absence of
fair value.

And, well, yes it would. But that’s the point ­ transparency. There was a
time when fair value worked reasonably well ­ when things were on the up. It’s
when business goes bad that users start to complain.

Pressure is on to soften the blows through the accounting and both the IASB
and the US Financial Accounting Standards Board face the weight of City and Wall
Street on that one.

As for me, I can’t help feeling the mistakes were made at a stage well before
the accounting became an issue.

Gavin Hinks is editor of Accountancy Age

Related Articles

What do clients actually want from an accountant?

Accounting Standards What do clients actually want from an accountant?

1m Emma Smith, Managing Editor
Accountants shouldn’t neglect hybrid mismatch anti-avoidance rules

Accounting Standards Accountants shouldn’t neglect hybrid mismatch anti-avoidance rules

2m Alison Conley
Membership of the accountancy profession on the rise

Accounting Standards Membership of the accountancy profession on the rise

2m Alia Shoaib, Reporter
FRC investigates PwC over Redcentric audit

Accounting Standards FRC investigates PwC over Redcentric audit

7m Emma Smith, Managing Editor
AAT approved as apprentice assessment organisation

Accounting Standards AAT approved as apprentice assessment organisation

8m Accountancy Age editorial
The real price of mates' rates in the provision of professional services

Accounting Standards The real price of mates' rates in the provision of professional services

3m DAC Beachcroft
IASB overhauls insurance accounting with issuance of IFRS 17

Accounting Standards IASB overhauls insurance accounting with issuance of IFRS 17

4m Alia Shoaib, Reporter
Flag It Up! How accountants can protect themselves from money launderers

Accounting Standards Flag It Up! How accountants can protect themselves from money launderers

6m Emma Smith, Managing Editor