Deloitte response to the Joint Working Group Proposal on Financial Instruments

Published on: 16 Oct 2001

Our basic position:

  • We support the increased use of fair values for financial instruments in financial statements as part of the evolutionary process that may ultimately result in a full fair value accounting model for financial instruments. However, we will not support the recognition in the income statement of changes in the fair values of financial instruments that are not being held for trading until issues relating to performance reporting and fair value measurement are resolved.
  • We believe that a movement to fair value accounting should be an evolutionary process that is accomplished in stages. IAS 32 started the movement by requiring disclosures of fair values of financial instruments. IAS 39 continued that movement by requiring that all derivatives and most financial instruments be reported at fair value. We believe the next step in the evolution could be a partial increase in the use of fair value accounting.
  • We recommend that the next step in the process of moving to fair value accounting for financial instruments be accomplished by amending IAS 39 to eliminate the use of amortised cost for originated loans, held-to-maturity financial assets and financial liabilities. Enterprises would have a choice of recognising changes in fair value in equity or in the income statement, except that there should be no choice for financial instruments held for trading. Enterprises would continue to be permitted to use hedge accounting.

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