IASB publishes guidance on fair value measurement

WebCPA.com in its publication dated November 4, 2008 alerted that The International Accounting Standards Board has issued educational guidance from an expert advisory panel on the controversial issue of fair value measurement when markets become inactive.

In conjunction with the 84-page report, the IASB also published an eight-page staff summary, outlining the highlights of the major issues in the report and the contex.

The report and summary take into account recent documents issued by the U.S. Financial Accounting Standards Board and the Securities and Exchange Commission's Office of the Chief Accountant.

The Press Release of IASB dated October 31, 2008 said that the International Accounting Standards Board (IASB) today published education guidance on the application of fair value measurement when market become inactive.

Further, it said that the education guidance takes the form of a summary document prepared by IASB staff and the final report of the expert advisory panel established to consider the issue.

The summary document sets out the context of the expert advisory panel report and highlights important issues associated with measuring the fair value of financial instruments when markets become inactive.

"The expert advisory panel has provided useful input to a number of projects and we are moving quickly to incorporate their valuable contributions into our standards. Round-table discussions in Asia, Europe and the United States, to be held jointly with the FASB, will provide additional opportunities to gather views on where further enhancements may be required. Added to this, the joint IASB - FASB high level advisory group now being set up will provide advice to both boards on the reporting lessons from the credit crisis," said Sir David Tweedie, chairman of the IASB, commenting the publication of the guidance report.

Go here for the full press release issued by IASB on October 31, 2008 and for downloading the final report of the expert advisory panel and the IASB staff summary.

Several Accounting Changes Done by IASB in response to the Global Financial Crisis

CFO.com in its article today, October 15, 2008 titled "Fair Value Tweaking on a Global Scale" said that "In response to the global credit crisis, the International Accounting Standards Board has made its third announcement in as many days about slight changes to fair value accounting rules. The proposal issued today is a tweak to IASB's financial instrument disclosure rule, which is out for public comment until December 15.

The proposal streamlines disclosure requirements related to changes in valuation techniques for financial instruments. Rather than specifying what circumstances trigger new disclosures, the proposal simply requires that any change in valuation techniques be disclosed - plus the disclosure must include the reason for making the switch. The draft rule, which is a proposed amendment to IAS 39, applies to each class of financial instruments a company holds."

Further, the article said that "Earlier in the day, accounting regulators from the European Union voted in favor of an IASB fair value rule revision issued on Monday. The revision allows companies to reclassify financial assets to avoid marking the assets to market in some limited cases. The proposal must still be approved by the EU Parliament before taking effect.

The reclassification rule, which is part of a revised IAS 39, was finalized on October 13, and mirrors an existing U.S. standard - FAS 115."

Explore more in here : Fair Value Tweaking on a Global Scale

On October 13, 2008, IASB issued amendments to IAS 39 Financial Instruments : Recognition and Measurement and IFRS 7 Financial Instruments : Disclosures that would permit the reclassification of some financial instruments.

The amendments to IAS 39 introduce the possibility of reclassification for companies applying IFRSs, which were already permitted under U.S. GAAP in rare circumstances.

Here is the link to the story : IAS amendments permit reclassification of financial instruments

Next, on October 14, 2008, IASB provided an update on its work to consider the application of fair value when markets become inactive.

In May 2008 and at the request of the Financial Stability Forum (FSF) the IASB established and Expert Advisory Panel to consider the application of fair value when markets become inactive. The Panel has since met on seven occasions, the latest of which was on Friday, 10 October.

Several issues were discussed and agreed by the Panel during the meeting.

Click here to explore : IASB provides update on applying fair value in inactive markets

Latest, on October 15, 2008, as part of the IASB's response to the credit crisis, IASB published for public comment proposals to improve the information available to investors and others about fair value measurement of financial instruments and liquidity risk.

The proposals also reflect discussions by the IASB's Expert Advisory Panel on measuring and disclosing fair values of financial instruments when markets are no longer active.

For more information, click the following link : IASB proposes improvements to financial instruments disclosures