 Research Note: Revisiting Fair Value Accounting––Measuring Commercial Banks’ LiabilitiesRobert P. Gray Abacus, 2003, vol. 39, issue 2, 250-261 Abstract: IAS 39, Financial Instruments: Recognition and Measurement (IASB, 2000), requires assets to be marked to fair value if held‐for‐trading, available‐for‐sale purposes, or if they are derivatives; held‐to‐maturity securities, originated loans and originated securities are measured at amortized cost, providing they are not held‐for‐trading. Financial liabilities are measured at amortized cost except those that are held‐for‐trading or derivatives. A proposed amendment would accommodate improved fair value measurement of financial instruments. Commercial banks are greatly affected by any accounting standard concerning the recognition and measurement of financial instruments, whether related to assets or liabilities. This article demonstrates that the existing and proposed standards perpetuate the mismeasurement of interest rate risk for commercial banks. Under IAS 39 banks that have a balanced position, that is, no interest rate risk, counterfactually could show large changes in income through interest rate changes. An alternative accounting treatment, full fair value reporting of financial assets and liabilities, including all loans and deposits, is offered. Presently fair value data are mandated as footnote disclosure. Date: 2003 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:abacus:v:39:y:2003:i:2:p:250-261 Ordering information: This journal article can be ordered from Access Statistics for this article Abacus is currently edited by G.W. Dean and S. Jones More articles in Abacus from Accounting Foundation, University of Sydney |
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