Canada Works Toward Global Standard
Canada's Accounting Standards Board today released a draft proposal on accounting for financial instruments. The proposal is based on valuing financial instruments, including derivatives and debt, at current market value as opposed to historical cost.
The fair value proposal is in compliance with a recognition of a need for an international standard of valuation. Such need for a comprehensive standard on accounting for financial instruments is being addressed by the U.S. Financial Accounting Standards Board and the International Accounting Standards Committee.
The change to a market valuation for financial instruments would necessitate the recognition on income statements of gains and losses resulting from changes fair value. It is thought that this type of accounting will provide investors and analysts with a clearer picture of an entity's true financial situation.
"The importance of having a global standard for financial instruments cannot be overemphasized," said Tricia O'Malley, FCA, Chair of the Accounting Standards Board. "This is a clear case of needing global standards for a global marketplace."
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