By Raman Jokhakar, Tarunkumar Singhal, Chartered Accountants
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28 SEC Advisory Committee takes up fair
value accounting, drops discussion of IFRS
The jury is still out on the absolute merits of fair value
accounting for financial statements, a variety of experts told the Securities
and Exchange Commission’s Advisory Committee on Improvements to Financial
Reporting in an open meeting on May 2, 2008, in Chicago.
“What are users most interested in ?” said one of the
participants. “Then there’s the issue of what’s doable. I think we’re finding
with [the Financial Accounting Standards Board’s (FASB) Statement of Financial
Accounting Standards (SFAS) No. 157, Fair Value Measurements] it’s challenging
for financial statements.”
The sub-committee’s report cautions against expanding the use
of fair value in financial reporting until a number of issues are better
understood and resolved, including the FASB’s project on the measurement
framework, which is looking at developing a consistent approach to determine
which measurement attribute should apply to different types of business
activities.
“What we have proposed is a framework not based on any one
asset, we’ve based it on activities,” said Susan Schmidt Bies, the Chair of
CIFR’s Substantive Complexity Subcommittee and a member of the Federal Reserve
Board from December 2001 through March 2007. “We think that’s what users want,
and it’s more based on what businesses do, because it asks what is the cash flow
recognised in the financial statement and how is that related to what’s going on
in the income statement.”
The sub-committee report says the SEC should recommend that
the FASB “be judicious in issuing new standards and interpretations that expand
the use of fair value in areas where it is not already required, until
completion of a measurement framework.”
(Source : Internet Newswires, 6-5-2008)
