Bank assets book-keeping valuation rule simplified

November 12, 2009

    LONDON, Nov 11 (Reuters) – Pricing bank assets may prove less of a rollercoaster ride in future crises after a global standard setter revised a key accounting rule on Thursday after calls from world leaders to curb credit crunch fallout.
   The International Accounting Standards Board (IASB) sets book keeping rules used in over 100 countries and has simplified how companies classify and measure assets on their books.
   The G20 group of leading countries agreed in April that major standard setters should simplify the “fair value” or mark to market accounting rule by the end of this year, specifically to help banks and insurers which are most affected by the rule.
   This will allow the financial sector to apply it in their 2009 annual reports being drawn up over coming weeks.
   Policymakers hope banks and insurers will end up valuing fewer assets at the going rate and instead value them at cost, a more stable reference over time.
   The slump in some assets during the credit crunch forced banks to make huge writedowns to reflect depressed values of instruments valued at the going rate, sparking the need to raise fresh regulatory capital at a time of market turmoil.
   “We have delivered on our commitment to the G20 and stakeholders internationally to provide an improved financial instrument standard for the classification and measurement of financial assets for use in 2009,” IASB Chairman, David Tweedie, said in a statement.
   (Reporting by Huw Jones; Editing by Toby Chopra)
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 Keywords: ACCOUNTING/
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 Thursday, 12 November 2009 10:36:47RTRS [nLC430128] {EN}ENDS

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