8 April 2009

Banks press accounting body to adopt U.S. rules

This article is excerpted from the 8 April 2009 edition of “globeandmail.com”.

Canada's big banks are pushing the country's accounting czars to adopt U.S.-style reforms that would make it easier for financial institutions to avoid taking hits on some of their holdings.

In response to political pressure to help troubled banks, U.S. standard setters moved last Thursday to ease some mark-to-market accounting rules – guidelines on determining the value of certain debt instruments that have been blamed by some U.S. financial institutions for forcing massive writedowns and exacerbating the financial crisis.

Canada's Accounting Standards Board plans to wait until the end of the month to respond to the U.S. changes, a delay the Canadian Bankers Association said will penalize domestic banks because new standards won't be announced in time for the end of their second quarter on April 30.

“Consistency of reporting for financial institutions in North America is crucial at this time to avoid uncertainty and confusion among financial statement users,” the association said in an e-mailed statement.

Canada's biggest banks have taken nearly $20-billion in writedowns on their assets since the crisis began….

Canada's Accounting Standards Board is waiting because it wants to see what the International Accounting Standards Board (IASB) decides to do about the U.S. amendments at a meeting on April 23 and 24 in London, said Paul Cherry, chairman of the Canadian board.

He said Canada is caught in a dilemma because it normally harmonizes with U.S. accounting rules, owing to the integrated nature of the two economies: ….

But, he added, Canada has also pledged to adopt international accounting standards in 2011, and has said it will not make changes in the interim that move away from the international rules. …

A simple solution would be if the IASB were to also adopt the same changes the U.S. rule makers adopted last week, allowing Canada to move in tandem with both bodies, he said. But the IASB has signalled that it may not be willing to adopt the same rule changes at its April 23 meeting….