The International Accounting Standards Board
has expressed concern over the inconsistent way that banks and
insurers have been applying IAS 39 Financial Instruments:
Recognition and Measurement when reporting the value of their Greek
sovereign debt.
In a letter to the European Securities and
Markets Authority (ESMA) the IASB chairman Hans Hoogervorst said
that the recently published financial reports indicate that “some
European companies are applying the accounting requirements for
fair value measurement and impairment losses in a way that seems to
differ from the objective of IAS 39”.
“It appears that some companies are not
following IAS 39 when determining whether the Greek government
bonds that they classify as AFS [available for sale] are impaired.
They are using the assessed impact on the present value of future
cash flows arising from the proposed restructure of those bonds,
rather than using the amount reflected by current market prices as
required in IAS 39,” Hoogervorst writes in the letter to the
regulator.
Hoogervorst also said some companies holding
Greek government bonds classified as AFS have stated that they are
relying on internal valuation methodologies, “rather than on market
prices, to measure the fair value of the assets as at 30 June
2011”.
The IASB does not normally comment on the
application of IFRS, however Hoogervorst said that due to the
visibly inconsistent application, the standard setter believes that
it is appropriate to bring this matter to ESMA’s attention.
The IASB’s letter did not single out any banks
or countries.
