This is what needs to be remembered when discussing something as important as suspending fair value accounting.

There has been unprecedented pressure for fair value to be suspended or removed. These calls switched from financial institutions to politicians.

Republicans wanted it suspended as part of the $700bn rescue package, the president had wanted it gone and the Tories finally added their views, with David Cameron rounding on this now most controversial of all standards.

Their intervention, though welcomed by banks, was not welcomed by regulators, the profession and, most importantly, investors ­ few of whom saw in suspension a route to solving the credit crisis. Indeed, some see it as accountancy being used as a political football.

On Friday Europe pulled back from the brink but the situation is extremely fluid. Politicians may not have moved to kill fair value as yet, but the battle is not yet over.

Investors and regulators will need to continue re-emphasising the message because the attack could be renewed. Paulson’s rescue in the US reiterated the powers of the financial watchdog to suspend fair value.
We do not know at this time whether the right will be used, giving reason to believe it may yet be delivered a damaging blow. Changing rules in the heat of the moment is never a good idea, but experts fear a suspension is likely to turn into a permanent arrangement.

If it is to be a full time change then the alternatives need much more consideration ­ and no politician seems able to offer a decent replacement at present.

comment@accountancyage.com

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