Board (IASB) has resisted political pressure to amend IFRS in line
with recent US changes to fair value measurement and impairments of
The US Financial Accounting Standards
Board (FASB) changes included guidance for determining whether or
not a market is active and a transaction distressed, and guidance
altering the recognition and presentation of other-than-temporary
The changes were welcomed by the American
Center for Audit Quality executive director
Cindy Fornelli said the FASB did a good job of getting a wide range
of opinions in the 15-day consultation period.
“[They] proactively went out and tried to get
a variety of people’s opinions to see if they got it right,” she
The FASB said it received more than 600
written comment letters, emails and held face-to-face meetings and
other discussions with a broad range of constituents.
The changes were met with criticism by several
other stakeholder groups, who asked the IASB to not act as hastily
as the FASB, or in a “piecemeal” manner. The CFA Institute’s
Investors Working Group said the political and special interest
pressures placed on the FASB to change fair value accounting
standards were “unacceptable and very troubling”.
The European Financial Reporting Advisory
Group criticised the rushed nature of the changes. Other opponents
included the Institute of Chartered Accountants in England and
Wales (ICAEW), which said the FASB’s actions are “clearly
detrimental to the agreed strategy of jointly developing a single
set of high-quality accounting standards”.
“This piecemeal approach of rushing through
changes to what really is quite clearly political pressure in the
US is quite regrettable,” ICAEW head of financial reporting Nigel
Following the FASB changes, the
European finance ministers issued a joint statement calling on the
IASB to “co-operate closely with the FASB in order to immediately
address these issues… in order to avoid risks of competitive
But following a 30-day consultation period,
the IASB decided to not make any immediate changes to IFRS.
The board concluded the FASB’s fair value
guidance is consistent with existing IFRS guidance in the IASB’s
expert advisory panel report on applying fair value measurement to
financial instruments in distressed markets, and therefore a “level
playing field” already exists in that area.
The IASB will include relevant parts of the
FASB guidance in its exposure draft on fair value measurement, due
to be published next month.
The IASB said it agreed with a widespread view
among commentators that it should improve its impairment
requirements. However, it did not believe an immediate response to
the FASB guidance on impairment was necessary. Instead, it will
take up the issue as part of its review of IAS 39 Financial
Instruments: Recognition and Measurement.
A draft replacement for IAS 39 is due for
release in six months.
Call for Herz to
A US academic has called for US
Financial Accounting Standards Board (FASB) chairman Robert Herz to
resign after the FASB altered the application of fair value
measurement and accounting for impairments.
Edward Ketz, associate professor of accounting
at the Pennsylvania State University’s Smeal College of Business,
said that when accounting truth was at stake Herz compromised and
enabled corporate managers to “use methods and vehicles by which
they can cook the book”.
Ketz suggested the FASB had been under
pressure from industry and Congress to ease accounting rules.
He said some politicians could have been
threatening to take actions to dissolve the FASB if it did not make
these adjustments and that the standard setter should have gone
public, for example on television talk shows, to defend