Our ref: Tech4/SC0096
International Accounting Standards Board
30 Cannon Street,
London EC4M 6XH
Submitted electronically to www.iasb.org
19 September 2008
Dear Sir or Madam
Discussion Paper: Reducing Complexity in Reporting Financial Instruments
CIPFA is pleased to present its comments on this Discussion Paper, which has been
reviewed by CIPFA’s Accounting and Auditing Standards Panel.
We have considered the paper primarily in the light of the implications for financial
reporting for the public sector. Having said this, in our view there are no compelling
reasons why there should be significant differences between public sector and private
sector financial reporting of financial instruments. Government bodies in the United
Kingdom now report under UK standards which closely reflect guidance in IAS 32, IAS 39
and IFRS 7.
We agree with the IASB that the way in which financial instruments are accounted for
under existing IFRS is complex. While we recognise that financial instruments can be
complex and the way in which they are used can be complex, we also consider that the
existing accounting requirements add to that complexity.
We have no specific comments to make on the proposals for intermediate measures to
reduce complexity.
We would like to comment on the proposals for a longer term solution.
CIPFA agrees that the analysis in the Discussion Paper accurately sets out the concerns
and issues which need to be addressed.
The Board will be aware from other consultation responses that in general CIPFA
considers a current value approach to measurement to provide more relevant information
than historical cost. However, we have also consistently expressed concern over
proposals which promote the blanket use of ‘exit values’ that are observable market
prices.
Thus, while we support the Board in its consideration of a clearer and more consistent
approach based on current value, we are concerned that this consultation might
determine that the long-term objective should be to adopt full fair value for financial
instruments, in advance of the completion of more general discussion on measurement
as part of the IASB Conceptual Framework project, and resolution of issues relating to
the presentation of balances and movements in financial statements.
I hope these comments are a helpful contribution to the development of improved
financial reporting standards in this area.
Yours faithfully
Chris Wobschall
Assistant Director Policy and Technical
CIPFA
3 Robert Street, London WC2N 6RL
Tel +44 (0)20 7543 5647
chris.wobschall@cipfa.org