FASB plans to keep all financial instruments at fair value

BVWireIssue #82-4
July 29, 2009

In its most recent meeting (July 15, 2009), the Financial Accounting Standards Board proposed a model to improve financial reporting for financial instruments. According to a related release, the Board reached the following preliminary decisions:

  1. The Board agreed to propose that all financial instruments will be presented on the balance sheet at fair value with changes in value recognized in net income or other comprehensive income with an optional exception for own debt in certain circumstances, which will be measured at amortized cost.[…]
  2. The Board agreed to propose that changes in an instrument’s value may be recognized in other comprehensive income on the basis of qualifying criteria related to an entity’s management intent/business model and the cash flow variability of the instrument. The Board will provide additional guidance on how to apply those qualifying criteria.[…]   
  3. The Board agreed to propose to require one statement of financial performance with subtotals for net income and other comprehensive income. It also agreed to propose to continue to only require earnings per share for net income.

Compare this to IASB’s latest proposal. As reported in last week’s BVWire™, the International Accounting Standards Board has proposed permitting companies to continue carrying many financial assets at historical cost, including loans and debt securities. The Boards are scheduled to meet July 24th in London to discuss their contrasting plans. “The scope of the FASB’s initiative, which has received almost no attention in the press, is massive,” comments a new Bloomberg article. Only time will tell whether the FASB will be able to withstand international pressure as well as “stand up to the banking industry over mark-to-market accounting.”

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