The Committee of European Securities
Regulators (CESR) is seeking comments on proposed guidance for fair
value measurement and related disclosures of financial instruments
in illiquid markets.

The statement is intended to assist preparers when preparing the
next financial statements by taking into account the current market
conditions. The proposed guidance is divided into two categories:
measurement and disclosures.

The guidance emphasises the starting point for the measurement
of financial instruments is assessing whether an instrument is
traded on an active or non-active market. CESR suggested that as
the identification of an active or non-active market requires
judgement, a well-documented valuation policy that is consistent
across time and across financial instruments is needed.

CESR pointed out that as the use of valuation techniques also
entails a significant amount of judgment, the issuer should
document the criteria, the assumptions and the inputs to the
valuation techniques to ensure consistency.

It also noted that transactions conducted in a market that is
not considered active can often provide the most relevant input for
valuation techniques.

CESR emphasised that given the complexity of many business
situations, the different business rationales for holding financial
instruments and the uncertainty around fair values, clear
disclosures are necessary for users to understand these aspects and
their implications for the fair value measurements included in the
financial statements. The committee’s advice included that good
disclosure practice is a natural counterpart to the use of judgment
in measurement practices.

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CESR specified the proposed guidance remains under the domain of
the application of current IFRS. The consultation period ends on 12
September 2008. CESR will review the statement according to the
comments received and will publish the final document in October
2008.