IASB Borrows U.S Accounting For Financial Instruments
It took the IASB two weighty volumes to explain the "rules-based" approach in an exposure draft (ED). In its press release , the IASB acknowledged its ED is closely modeled on the approach of U.S. generally accepted accounted principles (GAAP). But, it says, this is just the first stage of the project. IASB Chairman Sir David Tweedie promised, "In the longer term, the IASB will initiate a complete re-examination of the issue with the aim of creating a universally-accepted principles-based approach for financial instruments."
The changes introduced in the IASB's ED include greater use of fair values, more guidance on the recognition of impairment losses, and a principle of 'no continuing involvement' to test asset sales. According to the Financial Times, this principle would restrict the ability of a company, such as Enron, to keep special purpose entities off the balance sheet. The proposed changes are expected to be controversial. The FT predicts an enormous amount of opposition from banks and other affected businesses. It says a U.K. exposure draft, FRED 30, will attempt to smooth the way for U.K. businesses. But this, too, will be a "source of much argument." ("Unpopular standards," Financial Times, June 20, 2002)
Read  what U.K. AccountingWEB has to say about FRED 30. Request  a copy of the IASB's "Exposure Draft of Proposed Amendments to IAS 32, Financial Instruments: Disclosure and Presentation, and IAS 39, Financial Instruments: Recognition and Measurement" for $28 from IASB publications.