IASB, FASB to move in lock-step on fair value rules

By Emily Chasan

NEW YORK, Nov 17 (Reuters) - International and U.S. accounting rulemakers will move "in lock-step" on future changes to mark-to-market, or fair value, accounting rules, a top international accounting rulemaker said on Monday.

A critic of recent political interference in the accounting standard-setting process, Sir David Tweedie, chairman of the London-based International Accounting Standards Board (IASB), said rulemakers would have to work together in the future and the board's defenses would have to be shored up to preserve accounting independence.

"We just have to work together, we can't have differences," Tweedie said in comments to reporters at a Financial Executives International conference in New York.

Last month, the IASB, which sets reporting rules used in over 100 countries, voted to ease the impact of fair value accounting, allowing banks to reclassify certain assets so they no longer have to be marked-to-market.

The change, made at the request of European leaders, aligned European standards more closely with U.S. rules, but the pressure sparked concerns about how susceptible the board was to political interference. The IASB had earlier dismissed requests to alter its rules on fair value.

"What this crisis has taught us is that if we've got different words (than the U.S. FASB), we get played off," Tweedie said. "That's why, in the future, changes on the fair value option, embedded derivatives and payments, will go in lock-step. We'll do it together."

The boards are considering further changes to fair value accounting rules, particularly in the way banks classify assets that have to be marked-to-market.

Fair value, or mark-to-market, accounting rules force banks to figure out the market values of their assets each quarter and report them to investors. However, the rules can be applied differently for debt securities that are "held-to- maturity" versus those that are for trading and "available-for- sale." Securities that are held-to-maturity usually do not have to be marked-to-market.

Tweedie said the boards would consider whether transfers should be allowed between categories and they would also be working together on enhanced disclosures for complex financial instruments, as requested by world leaders at the Group of 20 summit over the weekend.

"What we have to try to do is get rid of all these different categories with different impairment tests," Tweedie said. "Which ones does the financial community agree should be shown at fair value?"

The IASB will also need to protect itself better from future political interference, Tweedie said, noting how its constitution is likely to be changed next year to create a monitoring board of securities regulators to ensure the trustees oversee the IASB properly.

The monitoring board, which is expected to be composed of the chairmen from global securities regulators such as the U.S. Securities and Exchange Commission and Japanese Financial Supervisory Agency, could also help the IASB defend itself against political attacks, Tweedie said.

"Recent events have shown we have no protection from a real determined political assault," Tweedie told reporters. "This would give us it." (Editing by Andre Grenon)