The Association of Chartered Certified Accountants (ACCA) announced on Wednesday that it welcomes the International Accounting Standards Board's (IASB) publication of a consultation document on measuring financial instruments.
The accounting industry body observed that this can act as a focus for a necessary debate on the revision of a standard (IAS39) which is complex, largely rules-based and difficult to understand and apply.
ACCA revealed that it is supportive of more principled-based standards and a reduction in the complexity of the financial statements and accounting standards in this area.
However, ACCA expressed concerns about the problems of the reliability and subjectivity of the fair values when these move away from quoted market prices, and stated that it recognises the problems with the presentation and relevance of gains and losses from these fair value changes when these form part of the results of the period.
The ACCA further stated that it has particular concerns over the treatment of fair value changes in a company's liabilities, when a falling credit rating could give rise as a gain in the accounts.
More broadly where there is a realistic choice between an historical cost and a current exit value, the ACCA have stated that there should not be an automatic assumption that exit values will always be the best answer.
Despite this, the Association noted that with the current situation in the financial markets, the key issue is the recoverable amount of financial assets - and the same fair values would have to be used whether in a mark-to-market accounting model or when considering the impairment of the cost of the assets.
It additionally drew attention to the important questions about the reliability of values under the current abnormal and volatile market conditions, and also of how to report conditions at the balance sheet date while updating users with important subsequent developments, observing in conclusion that:
"For example, in the current climate, a year-end report of 31 December on its own might already seem badly out of date by mid-March – witness Bear Stearns – so additional information would be needed."
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