17 September 2008

IASB update on credit crisis and expert advisory panel draft report

The draft report summarises the discussions of the panel and provides information and guidance for measuring and disclosing fair values. The update provides a timetable on forthcoming exposure drafts.

The IASB released an update on a range of projects that address issues highlighted by the credit crisis. It has also published a draft report which summarises the discussions of the expert advisory panel set up by the IASB to consider the application of fair value when markets are no longer active. The document provides information and guidance for measuring and disclosing fair values and does not establish new requirements for entities applying IFRSs or any other Generally Accepted Accounting Principles.

 

“Accounting is not the cause of the credit crisis, but it is important that market participants should have confidence in the information presented within financial statements”, Sir David Tweedie, Chairman of the IASB, said.

 

The IASB expects to publish:

• an exposure draft on the revised standard on Consolidation later this year, and to issue the standard in the second half of 2009.
• an exposure draft on Derecognition after it has published the exposure draft on consolidation.
• the proposed amendments on Disclosures later this year as an exposure draft of a comprehensive IFRS 7 disclosure package.

 

Additionally, on the IAS 39 replacement the consultation period ends on 19 September. The IASB will decide later this year whether to add the project to its active agenda.

 

Draft report:

On fair value measurement and the use of a ‘fundamental value’ approach when market prices are stressed, the draft report states among others that such ‘fundamental values’ are not consistent with the fair value measurement objective because they ignore the spreads that market participants would require for bearing risk and for other factors, such as illiquidity. In other words, they do not represent the price at which a transaction would occur between market participants on the measurement date.

 

The document also includes a number of recommendations on the disclosure of information with regard to IFRS 7.

 

Deadline for comment on the draft report is 3 October 2008.

 

Press release

Update

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