Monday, April 13, 2009

CFAs Don't Like IASB Changes to Fair value Accounting Rules

The CFA Institute, the governing body that administers the Chartered Financial Analyst designation, does not like IASB proposed changes to market-to-market accounting rules.

They argue that the IASB needs a comprehensive review of the financial instrument accounting rules and not follow a piecemeal agenda to reform accounting standards.

A CFA managing director warns that the amendments to IAS 39 reclassification rules, and the political pressures that have led to the revision of FASB rules on fair value and impairments, are likely to result in "unintended consequences."

"It is essential the IASB avoids engaging in an exercise to dilute standards to align with U.S. GAAP," he says. "This crisis presents a window of opportunity for the IASB to improve the current financial instrument accounting in the interests of all its stakeholders. This can be judged a success if it improves the overall transparency of information available to investors, and if the IASB is able to operate independently to pursue this objective. The short-term focus should be on providing capital relief by amending capital adequacy rules and not by simply changing measurement rules."

The CFA Institute claims that investor interests must come first, and this can only be achieved through improved and transparent financial reporting. They say the new rules could obscure true economic performance and accordingly reduce investor confidence and reduce the ability of constrain the ability of banks to raise private capital, as a result increase risk in world financial systems.

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