Le Magazine du Trésorier - n°63 - 3ème trimestre 2008 - (Page 3)

Fair Value could become very complicated to determine in volatile markets. N obody could dare contesting the current market volatility: gold; crude oil; commodities; USD/EUR, GBP/EUR ; some emerging countries currencies or even interest rates. In such a complex market environment, we all understand why lots of European treasurers complain about financial reporting. We have entered into a credit crunch phase although there are huge liquidities on the market not suitably allocated because of a lack of confidence and absence of visibility. It is the current market paradox. Now these complains seem to focus on the Fair Value for reporting financial instruments. EACT has reported several times recommendations from its members for more guidance and also clearer rules to valuate financial instruments. It is particularly crucial when markets are under stress and when we face a turmoil. In annuals reports, there should appear better, clearer and more comprehensive disclosures on methodologies and (potential) uncertainties in valuations. We all heard these proposals made to IASB to make easier for preparers to possibly move their financial instruments from “Available-for-sale” (AFS) category the “Held- to- Maturity” (HTM) one.As HtM does not require to be fairly (re)-valued, its potential implied volatility can be parked. When markets have shacked, this could of course be comfortable until economy comes back to more normal market conditions. It obviously artificially hides an unpleasant economic reality at top management discretion. But who dares pretending what is normality in current market context? No one I guess. Furthermore as always, it would generate additional complexity and new rules complexifying an already complicate standard. The risk of unconsistent application of the rule could be negative in terms of clarity and understanding for users. The International Accounting Standard Board (IASB) IASB has addressed in March 2008 the issue of complexity of the reporting of financial instruments. Everybody knows its long-term intention to apply the fair valuations to all instruments.Therefore, any attempt to set up an intermediary solution shaped towards a simplification of current rules could only be welcome. In this view, the reduction of financial instruments categories is a good idea the “group of 4” ( at FIWG) has presented and defended When markets are illiquid or stretched, it becomes extremely difficult to assess the FV .On the other hand no one could reasonably expect IASB to report at cost.The Cornelian dilemma comes from the need for clearer guidance on valuation although it is highly complex to achieve. Everybody would prefer principle-based standards (even in the US) and not too detailed rules. But the more IASB issues guidance, the more standards become rule-based. We know that IASB refuses this tendency to inflate rules.We believe them when they desperately claim for simplification.What we refuse is a radical more towards full FV. Concise guidance is a sort of accounting Holy Graal for financial instruments.To impose one methodology would be over simplistic and simply impossible. Let’s remain realistic! Numerous users require more disclosures although others complain about current length of financial reports, which, in fine, reduces understandability and transparency. We have certainly (partly) missed the initial goal on IAS 39 and IFRS 7.We should not hide or try to disguise the economic reality, a fortiori in a troubled market. From the presentation of results it should be clear for users to understand from where volatility is coming from.To inundate reports with additional disclosures would be counterproductive.We all hope simplification will emerge from this Discussion Paper and IASB initiative. By François Masquelier Honorary chairman EACT EDITORIAL

Table des matières de la publication Le Magazine du Trésorier - n°63 - 3ème trimestre 2008

COUVERTURE
SOMMAIRE
EDITORIAL
FINANCIAL HIGHLIGHTS
INTERVIEW
FOCUS
FORUM OF ADVERTISERS
TREASURERS’ ASSOCIATIONS
NEWS

Le Magazine du Trésorier - n°63 - 3ème trimestre 2008