ICAEW argues that the model provides a much better platform for convergence between the two accounting standards setters’ rulebooks.
Dr Nigel Sleigh-Johnson, Head of ICAEW’s Financial Reporting Faculty, said:
“The FASB proposes to include both amortised cost and fair value information in the balance sheet. In our view this will only serve to make statements harder to read and information more difficult to understand for investors. It will also be more costly for businesses."
“Simplification of the standards for financial instruments accounting is a key priority, and is an objective endorsed by the G20 governments. The FASB’s proposals are surely pulling in the wrong direction."
“We are longstanding supporters of the aim of developing a single set of accounting standards for use globally, but the focus of the IASB must remain very firmly on high quality financial reporting and cost: benefit considerations. Achieving convergence, whether between IFRS and US GAAP, or IFRS and any other GAAP, should play second fiddle in the standard setting process.”
In its formal submission to the FASB consultation which closes on 30 September 2010, ICAEW will note that hedge accounting is the most complex area of financial instruments accounting and suggest that the current rules are so detailed and specific that hedging strategies are difficult to achieve, explain and understand.
The FASB’s proposed approach to hedge accounting introduces some simplifications but retains many of the rules about what is eligible for hedge accounting. ICAEW will be looking carefully at the IASB’s proposals in this area (due out for consultation later this year) to see whether they meet the objective of simplifying the requirements for the benefit of both business and users of financial reports.
© ICAEW - Institute of Chartered Accountants in England and Wales
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