Mario Christodoulou, Accountancy Age, Thursday 22 July 2010 at 11:43:00

Attempts to bring in fair value standard, "almost like a religious war"board member claims.


A member of the US accounting standard setter member has likened attempts tobring in fair value as a ?religious war?, in a speech with regulators this week.

Lawrence Smith, board member with the Financial Accounting Standards Board(FASB), made the comment in a panel discussion with US audit regulator, thePublic Company Accounting Oversight Board, in the midst of a far rangingconsultation on the accounting principle.

FASB is pushing ahead with plans to bring in a full fair value measurementmodel which would force banks to value their financial assets at market prices.The proposals are being fought by banks who argue the rules would add volatilityto balance sheets.

Smith signaled a desire within FASB to bring in the model, describing thequest as ? a religious war?.

?Some people have advised us that we shouldn?t say this, but I?ll say it -fair value, to some of us, is almost like a religious war out there and we aretrying to deal with that as best we can,? he said.

FASB is attempting to harmonise its accounting rules with internationalstandards, despite clear differences in their approach to fair value. WhereasFASB?s proposal measures assets measured at fair value, the international modelallows some loans to be valued at amortised cost.

The contentious proposals was passed by a single vote, with the five-memberFASB board split 3-2.

Smith?s comment will likely widen the gap between FASB?s proposal and itsinternational counterpart, the International Accounting Standards Board (IASB).Failure to reach agreement on the standard will undermine US attempts to adoptinternational rules.

The US Securities and Exchange Commission is currently investigating theimpact of international accounting rules on US markets. A key part of theirfinal decision will depend on the level of convergence between US andinternational accounting rules, with fair value being among the most importantproject on the table.

Further reading:

PCAOBSAG MEETING

Europemust stop its meddling, says FASB chief