21 October 2008

3L3 Committees joint statement on fair value accounting

The Committees welcome the action taken by the IASB and the new regulation from the European Commission, and encourage preparers and auditors to follow this IASB staff position immediately. 

The Committees welcome the urgent action taken by the IASB and the new regulation from the European Commission, and encourage preparers and auditors to follow this IASB staff position immediately. 

 

EU preparers, auditors and other stakeholders should take note of the IASB staff position on the SEC-FASB clarification on fair value accounting. In particular, the three Committees take note and support that the clarification addresses among other issues the following topics:

• Management’s internal assumptions. The use of management estimates that incorporate current market participant expectations of future cash flows, and include appropriate risk premiums is acceptable, when an active market for a security does not exist.
• Use of market quotes when assessing the mix of information available to measure fair value. Broker quotes may be an input when measuring fair value, but are not necessarily determinative if an active market does not exist for the security.
• The results of disorderly transactions are not determinative when measuring fair value. Distressed or forced liquidation sales are not orderly transactions. Determining whether a particular transaction is forced or disorderly requires judgement.
• Transactions in an inactive market can affect fair value measurements, they may be inputs when measuring fair value, but would likely not be determinative. The determination of whether a market is active or not requires judgment.

 

The IASB Expert Advisory Panel is asked to finalise the guidance on the IAS 39 and IFRS 7 amendments as soon as possible. Also, the Committees urge the IASB and the FASB to speedily issue the common guidance announced in the press release on 14 October 2008, on accounting questions arising from the US Emergency Economic Stabilization Act of 2008.

 

Statement

 

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