S&P Attacks Fair Value Rule

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Byline: Natasha de Teran

The new International Accounting Standards (IAS) have come under attack for their treatment of derivatives.Standard & Poor's, the credit rating agency, has highlighted its concerns in a report on the fair value - or mark-to-market - accounting treatment for derivatives and the burdensome restrictions on hedge accounting under IAS.

Sylvie Dalmaz, a credit analyst at S&P in Paris and author of the report, says: "The June 2002 draft revision of IAS 39 will introduce added complexity and volatility into banks' financial statements."

The European Union says new international accounting standards must be adopted by 2005. With few exceptions, European listed companies will have to meet the International Accounting Standard Board's IAS for their consolidated accounts, a move that will affect around 7,000 companies. Dalmaz says just four of the big European banks were reporting to IAS as of June 2002.

The rule that Dalmaz refers to, IAS 39 - financial instruments: recognition and measurement, is one of the more controversial standards. …