EBA欧洲银行-2009-04-20-28CEBS-input-to-IASB-on-FASB-proposals29_5页_109kb

CEBS Summary on Proposed FASB Amendments

Core Content

The Committee of European Banking Supervisors (CEBS) has provided its views on the proposed FASB amendments related to fair value measurement and impairment requirements for certain investments in debt and equity securities. These views were initially based on the original FASB proposals but have since been adapted to reflect the final FASB staff position. CEBS, composed of high-level representatives from banking supervisory authorities and central banks across the European Union, emphasizes the importance of promoting sound and high-quality accounting and disclosure standards, as well as transparent and comparable financial statements to strengthen market discipline.

CEBS is particularly attentive to developments in the context of the financial crisis and believes that some of its conclusions are relevant to the final FASB amendments. The committee is concerned that the FASB has issued these proposals and amendments in isolation from the IASB, contrary to the joint cooperation and convergence efforts previously announced.

Main Views and Comments

1) Fair Value Measurement Amendments

• General Welcome: CEBS welcomes additional guidance on fair value measurement, especially on determining market activity levels and identifying orderly transactions.
• Concerns:
  • Indicator (b): Uncertainty about what situations are considered when price quotations are not based on current information.
  • Indicator (d): The correlation between an asset's fair value and an index may not be a reliable indicator of market activity.
  • Indicator (h): Ambiguity about what constitutes "little information is released publicly," especially in OTC derivative markets.
  • Indicators (e) and (f): Liquidity premia and bid-ask spreads do not necessarily indicate an inactive market.
• Recommendation: CEBS encourages the IASB and FASB to develop joint guidance to ensure consistent application of fair value measurements across entities reporting under IFRS or US GAAP.
• Judgment Emphasis: CEBS reiterates that determining whether a market is inactive or a transaction is disorderly requires professional judgment and should not be based solely on the listed indicators.

2) Impairment Requirements for Debt and Equity Securities

• Welcome to the Amendment: CEBS welcomes the FASB amendment that separates credit losses from other factors in the recognition of impairment, with credit losses recognized in earnings and other factors in other comprehensive income.
• Recommendation to IASB: CEBS encourages the IASB to adopt a similar principle in IAS 39, supported by detailed guidance on separating credit losses from other risks.
• Concerns about AFS Debt Instruments: CEBS expressed concerns in its June 2008 report about the impairment treatment for Available-for-Sale (AFS) debt instruments, suggesting that only credit-related impairment should be recognized in profit or loss.
• Reversal of Impairment Losses: CEBS discourages the IASB from abandoning the current possibility of reversing impairment losses and urges it to extend this possibility to equity instruments to avoid under-impairment.
• No Changes to Loan and Receivables Rules: CEBS emphasizes that no changes should be made to the impairment rules for financial assets classified as loans and receivables or held to maturity, as they should only recognize fair value losses related to credit risk.

Key Information

• CEBS is advocating for convergence between IASB and FASB standards to ensure consistency and transparency in financial reporting.
• The fair value measurement project is seen as an opportunity to address the need for judgment and clarity in assessing market activity and transaction orderliness.
• CEBS highlights the importance of disclosure and valuation techniques, especially when relying on models rather than market prices.
• The impairment treatment for AFS debt instruments and equity instruments remains a key area for further clarification and alignment between IASB and FASB.

Conclusion

CEBS remains committed to the development of high-quality, transparent, and comparable accounting standards. It encourages continued collaboration between the IASB and FASB, particularly through the IASB Expert Advisory Panel, to ensure that fair value and impairment standards are practically applicable and judgmentally consistent.