A recent white paper released by the American Bankers Association (ABA) has raised concerns about the approach the International Accounting Standards Board (IASB) and its U.S.-based partner, the Financial Accounting Standards Board (FASB), are taking toward setting new global accounting standards related to financial instruments. The ABA paper also urges the two boards to remain diligent despite the urgency of the now waning global financial crisis. "What the accounting boards are discussing now would be the biggest accounting change we've ever seen," said Donna Fisher, ABA senior vice president of tax, accounting and financial management. "We are deeply concerned that the shortcuts being taken will result in flawed or inconsistent rules."
The ABA raised concerns with the IASB's scheduled timeline for completion, which some fear would not allow U.S. companies to get a word in when it comes to the proposal and public comment stages of standard setting. Recent proposals to expand mark-to-market, also known as "fair value" accounting, in financial statements were also of concern to the ABA, which has supported mark-to-market accounting for actively traded assets, while opposing it for most of the more traditional loans in which banks traffic. "Given the role that mark-to-market has played in exacerbating the current economic crisis, it is hard to understand the rationale for expanding it at this time," said Fisher. "Mark-to-market accounting lacks a sufficient level of reliability, which the current market has demonstrated."
Still, while the white paper took aim at some of the board's actions and proposals, it agreed with the IASB and FASB's long-term overall goal of international accounting standard convergence. "If the IASB finalizes its rule on accounting for loans and debt securities prior to the FASB finalizing its rule, FASB will have to adopt the IASB's rules or adopt a different rule which would result in divergence between U.S. generally accepted accounting principles (GAAP) and international rules," said the white paper. "The goal should be improving the current accounting rules that are in need of repair within a time frame that provides for due process and strives for international convergence."
Earlier this month, the ABA sent a document to the FASB and IASB offering its guidance on developing a new accounting model for loan and debt securities. Full copies of the white paper and the ABA's communications with the IASB and FASB can be found on the association's website at www.aba.com.
Jacob Barron, NACM staff writer