The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) appear to be edging closer to converging financial instruments measurement.
FASB chairman Robert Herz said this month that the board is seeking ways to “bridge the divide” between opposing views on measurement methods.
IFRS 9 Financial Instruments, published by the IASB last month, offers a mixed measurement model where amortised cost and fair value are used in different circumstances.
Speaking with The Accountant on the release of the standard, European Financial Reporting Advisory Group chair Stig Enevoldsen suggested one reason behind the EC’s controversial delayed endorsement of the standard was the borderline between amortised cost and fair value favoured fair value too much. He said a minor shift towards amortised cost would please a lot of people in Europe.
On the other side of the Atlantic, the FASB seemed set to propose a full fair value model. Sandra Peters, who heads the CFA Institute’s US-based financial reporting policy group, said US investors have traditionally resoundingly supported full fair value.
Peters said that in a soon-to-be-published member survey, 40 percent of respondents said full fair value was the way to go, about 30 percent said they would settle for a mixed measurement model and about 20 percent supported amortised cost.
However, Herz said the FASB is exploring a model that would reflect both points of view.
“On the one hand, by continuing to reflect a ‘business model’ approach to what gets reported in earnings, it preserves most of the current aspects of reporting net income and earnings per share,” Herz said.
“On the other hand, by presenting both fair value information and amortised cost information on the face of financial statements for instruments that are being held for collection or payment of cash flows, it could enable investors to more easily incorporate either or both in their analyses.”