IASB Seeks Comment On Discussion Paper On Reducing Complexity In Reporting Financial Instruments
March 19, 2008
On March 19, 2008 the International Accounting Standards Board (IASB) issued a Discussion Paper (DP) on "Reducing Complexity in Reporting Financial Instruments." The comment deadline is September 19.
The DP states (bullet formatting added):
The many ways of measuring financial instruments and the associated rules are one of the main causes of today’s complexity.
A long-term solution to address such measurement-related problems is to measure in the same way all types of financial instruments within the scope of a standard for financial instruments.
Fair value seems to be the only measure that is appropriate for all types of financial instruments.
However, there are issues and concerns that have to be addressed before the boards can require general fair value measurement."
It might take a long time to resolve all these issues and concerns.
Consequently, this paper considers some intermediate approaches that might be taken to reduce today’s complexity more quickly than by introducing a general fair value measurement requirement. The intermediate approaches discussed in the DP (which, it says could be considered in isolation or in combination) are:
For further information, see related summary and press release.
a. to amend measurement requirements (e.g. by reducing the number of categories of financial instruments);
b. to replace the existing requirements with a fair value measurement principle and some optional exceptions to fair value measurement; and/or
c. to simplify hedge accounting.
Prepared March 19, 2008 by Edith Orenstein, Director, Technical Policy Analysis, Financial Executives International (FEI). This summary does not represent FEI opinion unless specifically noted above.