Hans Hoogervorst doesn’t sound at all passive aggressive here or anything:
In case you thought the fair value debate was limited to the U.S. circa 2008, think again. A rule you probably haven’t heard of (but will likely see a version of once government debt becomes as much of a pain in the ass here as it has been in Europe) called IFRS 9 (which replaces IAS 39) would allow banks to price some government debt on their books at cost, instead of current awful prices.
Apparently the European Union doesn’t like this idea. EU Internal Market Commissioner Michel Barnier told a webcast meeting in New York this week “I do not believe this will be the first solution to the problems we face in Europe at the moment,” referring to IFRS 9‘s creative interpretation of “fair value.” Ironically, IFRS 9 accomplishes this feat by eliminating available for sale and held-to-maturity classifications for bonds, leaving only amortized cost and fair value.
IASB Chairman Hans Hoogervorst insists this plan is really only the suck less option, not some sort of magical accounting trick that will suddenly make Greece solvent and Irish banks healthy. “Under IFRS 9 impairments will still be painful but I am convinced it would be more timely done because the cliff effect is much less severe,” he said at a recent joint meeting of the IASB’s trustees and monitoring board of public officials, including Michel Barnier.
• Japan embraces new fair value rule [Financial Times via Accountancy Age]
Here’s a novel idea: making a decision on IFRS! Japan’s Financial Services Agency will be allowing companies to adopt the international version of the new fair value rule developed by the IASB, starting Wednesday. Since the world’s second largest economy is opting to pull the trigger on IFRS it may throw the G20’s request/demand for the world to get all kumbaya when it comes to accounting rules.
“Fair value accounting…as unleashed one of the most divisive debates to have emerged from the credit crisis, threatening to disrupt a pledge by the G20 group of leading economies to create a single, global accounting system by mid next year,” reports the FT and judging by the SEC’s indecisiveness, they may be right. With this latest development, now leaders will be able to blame each other’s securities agencies for their particular actions that will likely lead to divergence.
The allowance of Japanese companies to adopt IFRS 9 could also give Knight of the Accounting Roundtable, Sir David Tweedie, even more leverage when dealing with countries around the world to adopt the IFRS.
Right or wrong, the Japanese are sending a signal that they are prepared to move forward while the SEC prepares to have more meetings.
• GAO Criticizes PCAOB Approach to Audit Risk [Web CPA]
The General Accountability Office, never shy to point out the faults of others (that’s kind of what they do, after all), isn’t so keen on the PCAOB’s latest “risk assessment” audit standards. This after the PCAOB originally proposed standards in 2008 and then revised and re-released them late last year.
The GAO feels that the ‘duplication and inconsistencies’ created by the PCAOB’s new standards would likely lead to…more billable hours! So, as you might imagine, some firms are on board:
PricewaterhouseCoopers told the PCAOB, “We fully support the board’s objective to update interim standards regarding risk assessment,”
And some, not so much:
McGladrey & Pullen…warned that “unnecessary differences between the board’s standards and those of other standard-setters increase the costs of performing all audits because firms must develop and maintain two, and even three, audit methodologies and training programs, with no corresponding benefit to audit quality.”
Personally, we’re skeptical of anything that has the unmitigated support of the biggest players in the industry but from a more practical standpoint, do auditors really need more rules to follow? And now this could add to the workload? Is that really necessary?
• Oscar Swag Bags to Result in $91k Income to Celebrity Presenters [TaxProf Blog]
Celebrities have enough tax trouble the way it is, how is giving them gifts going to make their tax returns easier? We’re guessing most of them have smart CPAs working for them that will suggest that they give it all to charity but we may be underestimating the temptation of free luxury swag.
Sir David Tweedie and his fellow non-knighted wonks have released IFRS 9, Financial Instruments today to much anticipation. For those companies that were chomping at the bit, you can adopt pronto but nothing is mandatory until the end of 2012.
You got to hand it to Tweeds. The BSD at the G20 demanded that the IASB take another look (read: change) at this fair value thing ASAP and he delivered, AS PROMISED:
We have delivered on our commitment to the G20 and stakeholders internationally to provide an improved financial instrument standard for the classification and measurement of financial assets for use in 2009. Benefiting from unprecedented levels of consultation with stakeholders around the world, the IASB has made significant changes in its initial proposals to improve the standard, provide enhanced transparency and respond to stakeholder concerns.
Very impressive, so the ball is your court, Norwalk. You better get off your asses and come up with something good because none of you have knighthood and we haven’t seen much evidence of your re-quadrupled efforts. We already know that you’re talking Plan B but give us something, anything. You’re worried about Congress, sure but the Europeans are making you look bad. Is there any American knight-ish equivalent that Bob Herz could get that would help give him a boost in confidence?
If you’ve got suggestions, leave them in the comments. We’re at a total loss.
IASB completes first phase of financial instruments accounting reform [IASB Press Release]
New fair value standard rushed out by IASB [Accountancy Age]