Date issued: 23 October 2008

The decision by the International Accounting Standards Board (IASB) to change the fair value requirements of financial instruments must ensure quality financial reporting, CPA Australia has warned.

CPA Australia Chief Executive Officer Geoff Rankin said the organisation strongly supported the IASB's emphasis on a uniform global approach to the present financial crisis.

He said it reflected CPA Australia's support of the IASB's moves to implement uniform principles-based  accounting standards more broadly.

'CPA Australia is wholly committed to the IASB's development of principles-based International Financial Reporting Standards as the best way to achieve the efficient and transparent functioning of global capital markets,' he said.

'We support the removal of differences in the accounting requirements of the IASB and the Financial Accounting Standards Board  - as long as the quality of financial reporting is not diminished.'

Mr Rankin said the current situation with global markets highlighted the continuing importance of transparency and rigour.

'CPA Australia's view is that the fair value of financial instruments most accurately depicts the economic reality, as opposed to the alternative of using historical cost,' he said.

'If, however, the change were to result in an overall endorsement of income smoothing we could not support it because the quality of financial information would be diminished.'

'We understand that current conditions demand leadership and that there are some exceptional circumstances, but the quality of financial reporting must remain intact.

'The current crisis amply demonstrates the need for rigour, accuracy and transparency in the reporting of financial information,' he said.

Fair Value cost is the price an item would currently fetch on the open market. In the current crisis, many financial institutions find their financial assets' value greatly reduced, reducing their capitalisation ratios and severely limiting their ability to lend.

The IASB decision enables companies to report at amortised cost effectively insulating the asset from further loss of value.

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