FBE comment on the Fair Value Option Transitional Arrangements

21 April 2005

The European Banking Federation (FBE) issued its comments on the Fair value Option Transitional Arrangements. The FBE proposes a number of alternative proposals that have been proposed following the Roundtable discussions.

Alternative A proposes linking free choice over designation at the date of application of the amended fair value option to the date of adoption of IFRSs. This means that existing users of IFRSs (including entities that adopted the IFRSs as of 1 January 2005) would be required to de-designate financial assets or financial liabilities that do not qualify under the amendment.

Alternative B proposes linking free choice over designation at the date of application of the amendment to the date of adoption of IAS 39 as revised in March 2004. Existing users of IFRS would be required to de-designate financial assets or financial liabilities that do not qualify under the amendment and would therefore not be permitted to otherwise change designations.

Alternative C envisages a free choice over designation at the date of application of the amendment if the amendment is adopted in the annual accounting period of the entity before the proposed effective date.

Alternative D would provide entities - including existing IFRS users which apply the new fair value option for the first time in 2006 - with a free choice over designation.

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