Many European Union financial companies—including a majority of the biggest ones – have decided not to apply a relaxed accounting rule that would allow them to shelter assets from a fair value write-down. But those that have used the get-out have not disclosed enough about what they are doing, according to an analysis by regulators.
The International Accounting Standards Board rushed through the rule change in October, under intense pressure from European politicians and the banking industry. Both argued that market turmoil left banks facing confidence-destroying write-offs. The board amended International Accounting Standard No. 39, Financial Instruments: Recognition and Measurement, and International Financial Reporting Standard No. 7, Financial Instruments: Disclosures, so that banks could reclassify some assets, giving them the option to not carry them at fair value.
