2009 a ‘bellwether year” for fair value accounting: Fitch

Fitch Ratings anticipated debates about fair value (FV) accounting in 2008, but “the increased scrutiny accounting received in the wider global finance debate exceeded our expectations,” the ratings agency notes in a recent report.
Posted online, the special report is entitled: ‘Accounting and Financial Reporting: 2009 Global Outlook.’
This year looks to be “a bellwether for the direction of FV accounting” and also for further convergence of U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), Fitch’s report says.
The report says analysts and investors should be aware of some important, longer-term accounting changes that the accounting standard setters will debate in 2009.
“They include: financial statement presentation, revenue recognition, distinguishing between liabilities and equity, lease accounting and accounting for insurance contracts,” the report says.
“The business combination standard may add volatility to an acquirer’s income statement.”
Outside the United States, Fitch adds, “new segment reporting under IFRS will need to be explained well if analysts are to stand a chance of understanding the financial performance of a company given everything else that is happening.”
An immediate question facing some companies preparing their full-year 2008 financial statements is how best to justify a “going concern” basis, given the doubts some have about their ability to re-finance, Fitch says.
“Management statements on this issue should be required reading for investors and analysts.”