IASB announces four planned 'credit crisis' steps

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04 Oct 2008

The IASB has announced the current status of its response to the credit crisis and the next steps it expects to take.

In its announcement, the IASB indicated that it 'is closely monitoring developments in the United States and other jurisdictions to avoid unnecessary inconsistencies in accounting treatments under IFRSs and US generally accepted accounting principles (GAAP)'. The IASB's next steps will be in the following areas:
  1. Ensure consistency of fair value measurement guidance between IFRSs and US GAAP
  2. Consider the possible impact of the US Emergency Economic Stabilization Act of 2008 and other similar programmes internationally on the valuation of assets and liabilities
  3. Immediately consider the ability to reclassify financial instruments.

    US GAAP permits entities, in rare circumstances, to reclassify financial instruments that are in the form of securities from their trading portfolio (measured at fair value with changes through the income statement) to 'held to maturity' (measured at amortised cost and subject to testing for impairment). Also US GAAP permits some loans that are not securities to be transferred from Held for Sale (measured at lower of cost or market with changes through the income statement) to Held for Investment (measured at amortised cost and subject to testing for impairment). IAS 39 does not currently permit such transfers. The IASB intends to assess (at its October 2008 Board meeting) any inconsistencies in how IAS 39 and US GAAP practice address the issue of reclassifications and decide whether to eliminate any differences.
  4. Be willing to participate in any study on the impact of accounting in the credit crisis
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