Banking industry representatives and officials on an International Accounting Standards Committee working group butted heads Wednesday at a London meeting on fair-value accounting.
Neither side gave ground on the issue, which has heated up in recent months.
"Fair-value accounting would actually mislead the users of our financial statements," said Donna A. Fisher, director of taxes and accounting at the American Bankers Association. Joining the ABA were bank trade group representatives from Australia, Canada, the European Union, and Japan.
Under fair-value accounting, an asset or liability is valued on the basis of an estimate of what investors would pay for it on the open market. Under a cost-based value system, by contrast, the evaluation is made on the basis of original cost.
The Financial Accounting Standards Board already requires U.S. firms to use fair-value accounting for some financial instruments.
In an Aug. 31 paper, a working group of the International Accounting Standards Committee concluded that fair-value estimates of assets and liabilities would help investors understand a bank's financial position, performance, and risk. The committee plans to issue an "exposure draft," or proposal, toward the end of next year.
The five bank trade groups, however, said it makes no sense to use fair-value accounting with an asset that a bank plans to hold or for which there is no market.
Last week the international group of bank trade associations blasted the Aug. 31 report, calling it poorly reasoned and dismissive of opposing views. "We are disappointed at the consistent lack of evenhandedness displayed within the paper," the groups wrote.
Banks and some bank regulators also said they were not convinced that investors and other readers of banks' financial statements prefer fair-value accounting, as the working group claimed.
"The implementation issues need to be satisfactorily resolved," said Robert F. Storch, the chief accountant in the Federal Deposit Insurance Corp.'s supervision division, "and we need to be convinced that users do believe fair value is more relevant than the current model."