US pressure warps derivative accounting; the IASC's adoption of the FASB standard sacrifices logic for the sake of expediency

Article Abstract:

The International Accounting Standards Committee's decision to temporarily adopt the US Financial Accounting Standards Board's (FASB) derivatives accounting standards to meet the Apr 1998 standard-setting deadline appears to be misguided. The move ignores the weaknesses of the American proposals on measurement and hedging. Under the FASB's measurement standard, for instance, the conversion of fixed-rate borrowing into floating using a swap will generate different results from that produced by directly taking out floating borrowing. Another weakness is the provisions intended to discourage the abuse of hedge accounting. While these provisions are well-meaning, they contradict common commercial practices and risk management techniques. More comprehensive guidance may be in the offing if the plan to combine the efforts of the UK, the US, Australia and Canada to develop an international derivatives standard is pursued.

Financial Accounting Standards Board

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Where in the world is E48?

Article Abstract:

The International Accounting Standards Committee's (IASC) proposals on the establishment of a universal accounting standard for derivatives may end up being ignored by standard-setters in countries with the biggest derivative markets. These proposals, which were published in Jan. 1994 in the E48 exposure draft entitled 'Financial Instruments,' are considered to be a retrograde step by accounting standard-setters in the UK and the US. So different are the assumptions being used by the IASC in its derivatives proposals that critics charge that they are practically useless since they cannot be harmonized with the proposals forwarded by the influential Financial Accounting Standards Board (FASB) in the US. Among the issues that the IASC and the FASb disagree upon are the definition of a 'hedge' and the accounting method to be used when treating derivative transactions.

Regulation, Licensing, and Inspection of Miscellaneous Commercial Sectors, Accounting Services Regulation, Column, Accounting services, Accounting law

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A fruitless search for Utopia: the IASC's discussion paper on financial assets and liabilities fails to see the big picture

Article Abstract:

The International Accounting Standards Committee's (IASC) new discussion paper, 'Accounting for Financial Assets and Financial Liabilities,' demonstrates the difficulty of dealing with the issue of accounting for financial derivatives. The principles proposed in the document are intended to be universally applicable, yet they are likely to cause many problems for unlisted companies. They may prove too burdensome for privately-owned companies that do not use or restrictively use derivatives, as well as for those whose main financial instrument is bank debt. Requiring wholly-owned subsidiaries to fair value their inter-company debt may also raise questions. The IASC should probably adopt the approach of the UK Accounting Standards Board, which favor restricting financial instruments disclosures to companies whose securities are traded.

Liabilities (Accounting), Assets (Accounting)

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