Regulation (February 01, 2009)

FAIR VALUE DEBATE MORE VIGOROUS THAN EXPECTED

Fitch Ratings anticipated debates about fair value (FV) accounting in 2008, but “the increased scrutiny accounting received in the wider global finance debate exceeded our expectations,” the ratings agency notes in a recent report.

The report is entitled, Accounting and Financial Reporting: 2009 Global Outlook.

This year looks to be “a bellwether for the direction of FV accounting” and also for further convergence of U. S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), Fitch’s report says.

The report says analysts and investors should be aware of some important, longer-term accounting changes that the accounting standard setters will debate in 2009.

“They include: financial statement presentation, revenue recognition, distinguishing between liabilities and equity, lease accounting and accounting for insurance contracts,” the report says.

“The business combination standard may add volatility to an acquirer’s income statement.”