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We comment on Basel IAS 39 FVO proposals

  • Deloitte Comment Letter Image

01 Nov 2005

In July 2005, the Basel Committee on Banking Supervision issued a consultative document Supervisory Guidance on the Use of the Fair Value Option by Banks under IFRSs (PDF 83k) that discusses supervisory expectations for banks' use of the IAS 39 Fair Value Option.

Deloitte has submitted a (PDF 24k). We express concern that the proposed guidance could have the effect of modifying the fair value option provisions of IAS 39. Our overall view:

We believe that the guidance proposed by the Basel Committee on Banking Supervision will be perceived as an additional set of accounting rules applying to the banking industry in order to limit the use of the fair value option. We recognise that on page 1 of the Consultative Document it is stated that the Committee does not consider this proposal to be a set of additional accounting requirements, but we believe that this will be the effect, in practice. We are strongly of the view that the objective of the International Accounting Standards Board (IASB) is to set high quality accounting standards that entities across all industries have an equal opportunity to apply. We believe Banking Supervision has an important but separate and different objective and we support the Committee's work in promoting Prudential Supervision. We are concerned therefore that the proposals in the Consultative Document go beyond addressing the regulatory objective and will hinder the ability of a specific industry to apply an explicit option in the IASB's accounting standards.

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