Financial stability 'threatened by fair values'

News Article - 29 December 2006
Category:

International financial reporting standards (IFRS) - under which the reliability of fair values is governed - may pose a threat to financial stability, it has been claimed.

The finding has been made by an assessment of the accounting standards conducted by the European Central Bank which highlights the effect of the standards upon the financial system, reports Accountancy Magazine.

According to the report, entitled Assessment of Accounting Standards from a Financial Stability Perspective, some of the positive effects of IFRS include increased transparency and comparability and ensuring that risk exposure can be easily spotted through early indicatory signs.

However, the report also underlines areas which cause concern, saying that fair values should be properly documented and better measured so as to help the realisation of gains to be more forthright.

The report also indicates that the economic basis of hedge provision and accounting could be further areas of concern, the publication states.

In addition, the report covers the topics of market and credit risk in which standards were assessed along with the two categories to check for consistency.

Article keywords:

---

More industry news

• Think tank warns UK may have already slipped back into recession
• Growing demand for HR staff in technology and international sectors
• Boosting business growth a ‘priority’ to avoid Eurozone slowdown
• HMRC launches alternative disputes pilot scheme this week
• December employment statistics disregard gloomy recruitment predictions
• Eurozone manufacturing PMI shows modest improvement
• UK scores highly for economic governance by ratings agency
• Government launches two-year project focusing on manufacturing sector
• Burden of regulation on UK businesses ‘too high’

Back to news home page »