Bank Accounting: It's Still an International Clusterf&$%k
Hey don't we have our own accounting rule-setting agencies for this purpose? Just curious.
The group overseeing the International Accounting Standards Board has written to President Obama and the other G-20 leaders saying it is following the G-20 recommendations for dealing with fair value accounting for loans, after banking interests charged that it was not.
The letter follows on the heels of a letter by the American Bankers Association to Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke asking them to raise the issue at the Group of 20 meeting next week in Pittsburgh and curb efforts by the IASB and the U.S. Financial Accounting Standards Board to extend mark-to-market accounting to loans and debt securities, claiming that such a move would flout the recommendations of the G-20 (see Bankers Want G-20 to Rein in FASB, IASB).
The letter from Gerrit Zalm, chairman of the board of trustees of the International Accounting Standards Committee Foundation, defends the work of the IASB. He described how the trustees are stressing the urgency of revising the accounting standards for financial instruments, IAS 39.
“In making their proposals and in order to provide transparency and reflect economic reality, the IASB’s emphasis has been to define in a balanced and transparent way the appropriate criteria for classifying instruments to be measured at cost and fair value — not to increase or decrease arbitrarily the use of fair value,” he wrote. “Whether there is a decrease or an increase of fair value will depend on a particular institution’s business model and holdings. The IASB is not proposing that the loan book of banks will be held at fair value. Complementing the review of fair value accounting for financial instruments, the IASB is improving the accounting for loan-loss provisions, another area cited by the G-20.”
Um, you mean we haven't learned our lesson yet?
Let me remind the IASB in case they are still unsure on the point:
Humpty Dumpty sat on a wall,
Humpty Dumpty had a great fall.
All the king's horses,
And all the king's men,
Couldn't put Humpty together again.