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January 27, 2009

News Briefs

FRC chief executive stands down

CESR report reveals limited fair value reclassification

Obama adviser calls for rethink to fair value accounting

PEOPLEFRC chief executive stands down

The UK Financial Reporting Council (FRC) is searching for a new chief executive after Paul Boyle announced plans to stand down.

FRC chair Christopher Hogg said he had been aware that Boyle was likely to want to move on after five years as chief executive but was sorry he was leaving. Boyle has served as chief executive of the regulator since it was restructured in early 2004. Prior to that he was chief operating officer of the UK Financial Services Authority.

RESEARCHCESR report reveals limited fair value reclassification

Most European financial companies did not apply the recent amendments to IAS 39 allowing the reclassification of some financial instruments when preparing their third-quarter 2008 interim financial statements, according to a report from the Committee of European Securities Regulators (CESR).

CESR analysed the reports of the 22 financial companies that appear in the FTSE Eurotop 100 index, plus reports from 78 other companies. More than half of the companies did not reclassify any financial instruments in their third quarter 2008 financial statements.

Most of the companies that used the option reclassified from the category of fair value through profit and loss to loans and receivables.

The regulator predicted the year-end results will contain far more detailed information explaining the basis on which the accounting policy has been changed, the effect of that change and any key assumptions that have been made.

FAIR VALUE ACCOUNTINGObama adviser calls for rethink to fair value accounting

Fair value accounting principles have been criticised in a report from international consultancy organisation the Group of Thirty. Financial Reform: A Framework for Financial Stability was produced by a steering committee led by Paul Volcker, a key economic adviser of US President Barack Obama.

One recommendation is that fair value accounting principles and standards should be re-evaluated to develop more realistic guidelines for dealing with less liquid instruments and distressed markets. It calls for the development of principles-based standards that better reflect the business model of regulated financial institutions, apply appropriate rigour to valuation and require improved disclosure and transparency.

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