The US accounting standards setter’s efforts
to reduce complexity in reporting financial instruments has fallen
short, a UK institute claims.

The Financial Accounting Standards Board’s
(FASB) proposed financial instruments model includes both amortised
cost and fair value information in the balance sheet.

However, the Institute of Chartered
Accountants for England and Wales (ICAEW) thinks the FASB proposal
actually increases complexity and complicates convergence with
international rules.

ICAEW financial reporting faculty head Nigel
Sleigh-Johnson said the model will make statements harder to read,
information more difficult for investors to understand and it will
be more costly for businesses.

“Simplification of the standards for financial
instruments accounting is a key priority, and an objective endorsed
by the G20 governments. The FASB’s proposals are surely pulling in
the wrong direction,” Sleigh-Johnson added.

The International Accounting Standards Board
(IASB) has chosen a mixed measurement model meaning financial
instruments can be stated at either amortised cost or fair value in
the primary financial statements.

Due to the IASB and the FASB taking different
approaches to financial instruments classification and measurement,
questions are being raised as to whether the two boards can agree
on a final standard.

 “We are longstanding supporters of the
aim of developing a single set of accounting standards for use
globally, but the focus of the IASB must remain very firmly on high
quality financial reporting and cost benefit considerations.
Achieving convergence, whether between IFRS and US GAAP, or IFRS
and any other GAAP, should play second fiddle in the standard
setting process,” Sleigh-Johnson said.