The Accounting Standards Board has announced ‘emergency’ amendments to accounting standards for Financial Instruments Measurement, Recognition and Disclosure.

Section 3855 would require banks to mark to market or use fair value accounting for financial assets. However, given the current economic environment and credit crisis, amendments have been made to allow certain financial assets not be presented at fair value, therefore, having no immediate impact on the bank’s net income.

Mark to market accounting has been criticized by several executives within the banking sector as being unrepresentative of the bank’s economic and financial status. The reason: fair valuing is described as bringing volatility to the income statement and the current significant market declines are unrealistic to a bank’s strategies of holding certain assets over the long term. Massive losses on the income statement would be unrepresentative of assets eventually increasing in value further down the road.

It has been stated that these amendments could be open to abuses in justifying non-fair value classification. Finalization of these accounting changes are to be made by October 24, 2008.

For more information, visit the Accounting Standards Board Website at http://www.acsbcanada.org