Breaking finance and business news, tax information, jobs and more for finance directors and senior finance professionals.

Accounting

Divisions over fair-value accounting measurements

Written by Richard Northedge
Friday, 09 March 2007
The UK’s Accounting Standards Board is seeking companies’ views on the proposed international standard on measuring fair value. The consultation prior to submitting formal views to the International Accounting Standards Board (IASB) shows that there are deep divisions in the accounting profession over these fair-value measurements. The international body is seeking a common code for measuring value but the UK board is questioning some key parts of the discussion paper on the measurements produced by IASB. In particular the UK board questions the assumption that fair value should always equate with exit value. It acknowledges that the US accounting standard, SFAS 157, might be useful as a methodology for determining market-based exit prices but says it is not useful for purposes other than that required by the standards. Ian Mackintosh, chairman of the ASB, says the discussion paper’s arguments are scant. “We do not believe the SFAS 157 approach – which over-emphasise the advantages of efficient market fair values and does not adequately address the conceptual merits of alternatives – will lead to an appropriate evolution of measurement in financial reporting,” he says. Mackintosh also criticises the IASB’s “one size fits all” approach and says the appropriate valuation basis should be considered standard by standard. He also questions the assumption that fair value should always be assessed from the perspective of a market participant rather than that of the business entity. “SFAS 157 is based on the presumption that efficient markets are viable for all transactions and this approach needs a market participant to be identified. Markets are now always efficient and hence measurement from a market participant’s view is necessarily flawed,” he says. Visit the Accounting Standards Board website for more information at www.frc.org.uk/asb . If you wish to make your view known on the proposed fair-value measurements, please email comments to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it by 5 April 2007.