International Accounting Standards Board chairman, Sir David Tweedie, said he
will release a new fair value accounting rule by November.
In an address to a meeting of European Finance Ministers, which have in the
past been critical of the IASB’s response to the financial crisis, Tweedie has
sought to ease concerns by announcing that he is on track to deliver a new fair
value standard by the end of this year.
“I gave a commitment to deliver on this timetable. We will publish the new
standard in November,” he said.
The accounting rule known as fair value came under fire from banks and
sections of Europe in the wake of the financial crisis. The rule, which forces
companies to measure their assets at their fair market value, led to huge write
downs as financial institutions struggled to sell assets in stagnant markets.
Controversially, Tweedie said he will not require loan books to be held at
fair value which has now become a potential sticking point between the IASB and
its US counterpart the Financial Accounting Standards Board (FASB).
FASB’s proposal will see all assets measured at fair value. The IASB’s mixed
measurement model would see banks’ loan books valued on an amortised cost basis.
The two standard setters are trying to converge US and international
accounting rules, in the hope that the US will eventually adopt the new rules.
But the fair value standard has now emerged as a significant obstacle,
highlighted by Tweedie who said he simply did have the time to co-ordinate
efforts with FASB in the revision of fair value, in the wake of the financial
“As I said in June, given the urgency of the fundamental issues surrounding
IAS 39, none of us can afford the potential protracted back-and-forth resulting
from piecemeal changes in international and US standards that would undermine
the comprehensive and desperately needed reform that is under way,” he said.
“In our discussions with the FASB aiming to reach a common global approach,
we will emphasise our position in favour of a mixed measurement model over one
that requires full fair value measurement on the balance sheet… I remain
optimistic that we can overcome our current differences.”
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