President's Working Group, IASB Statements Reference SEC-FASB Guidance on Fair Value

Earlier today, the President’s Working Group on Financial Markets (PWG) issued a statement (see: PWG Statement) outlining how various regulatory agencies are responding to conditions in current markets, and referencing powers provided under the Emergency Economic Stabilization Act of 2008 (EESA). Chaired by the Secretary of the Treasury, the PWG Working Group includes the Chairs of the Federal Reserve Board, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.

Included among the various regulatory responses noted in today's PWG statement are the SEC-FASB’s joint clarification of fair value in inactive markets issued last week, and ongoing enforcement efforts. “The SEC and CFTC have dozens of ongoing investigations related to the current market conditions," says PWG, "and are using all of their tools to vigorously protect investors and maintain the integrity of our capital market.” In related news, the SEC announced on Friday “SEC Charges Five Brokers with Fraud in Sales of Unsuitable Securities Funded Through Subprime Mortgage Refinancings.”

Separately, on Friday, the IASB announced next steps in the credit crisis Key points include (1) IASB staff believes last week’s SEC-FASB clarification on fair value is consistent with IAS 39, and “The IASB will work closely with the FASB to develop a common approach to issues related to the valuation of financial assets and liabilities resulting from purchases made through the US [EESA] and any other similar programmes internationally, if and when these programmes are initiated,” (2) the IASB will meet next week to consider a specific inconsistency between its standards and U.S. GAAP, specifically, that U.S. GAAP allows transfers of certain financial instruments from “trading” to “held to maturity” or from “held for sale” to “held for investment”, with attendant differences in income statement treatment of changes in market value, and (3) indirectly referencing EESA requirement (Section 133, EESA) that SEC study the impact of FAS 157, Fair Value Measurement, and consider, among other things, “the advisability and feasibility of modifications to such standards; and alternative accounting standards,” the IASB states: “Consistent with discussions in the United States, the IASB will be willing to assist in any study that examines the quality of existing fair value information provided to investors and any impact of financial reporting on the credit crisis.” .

IASB also referenced its current Discussion Paper on Reducing Complexity in Financial Instruments which would potentially lead to an amendment of IAS 39, background can be found in IASB’s project summary on its financial instrumetns project, the Discussion Paper (the comment deadline was Sept. 19) and comment letters. See also this project summary on fair value measurement.

In other fair value news, Oct. 3 was the comment deadline for those wishing to send comments on the draft guidance released by IASB’s Expert Advisory Panel on valuing in inactive markets on Sept. 16. IASB is not formally requesting public comment on this document, and states, “Feedback received will not be put on public record. The panel will discuss the feedback received at its next meeting in early October. A final document will be posted on this Website shortly thereafter.” Also, as we reported on Friday, FASB released Proposed FSP FAS 157-d on fair valuing in inactive markets; comments are due Oct. 9 and FASB intends to discuss comments received and whether to finalize the guidance at a special board meeting scheduled for Oct. 10.

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