The European reaction as to how a proposed standard on fair value needs to be revised in order to be suitable for International Financial Reporting Standards is starting to emerge as a more of a "back to basics" cry.Among other things, regulatory experts within the EU are requesting a more principles-based approach and shorter documents than the 12 pages on FAS 157 and the 20-plus pages of guidance. They also maintain that any debate on the subject should not begin with the assumption that fair value needs to be reflected on the balance sheet. Others have forwarded suggestions on clarifying the language of the standard.

In the U.S., the Financial Accounting Standards Board's FAS 157 has already been cleared for implementation later this year. In the EU, which has been agonizing for at least some years over fair-value considerations, any new standard from the International Accounting Standards Board would then need to go through a lengthy adoption process.

The responses stem from a questionnaire sent out by the IASB in November, inviting comment on the rule. The board received some 140 responses before the comment period was closed in May. The IASB said that it would cull the pool of responses and issue an exposure draft by the end of 2007.

Getting down to more specific issues, Europeans are discussing language in the fair-value standard such as "current exit price."

The IASB has defined fair value, as set out in FAS 157, as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date."

Europeans are asking whether, in certain circumstances, "current entry price" would be better phrased. The European Financial Reporting Advisory Group added that there are "different types of measurement bases other than cost." The advisory body does, however, agree that there should be "a single source of guidance for all fair-value measurements," as well as being in favor of the convergence between IFRS and U.S. generally accepted accounting principles.

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