The Financial Accounting Standards Board has issued a proposal that would provide companies with the option to report financial assets and liabilities at fair value.

The board said that the change is aimed at simplifying accounting, as well as reducing the earnings volatility caused by differences in existing accounting rules.

The new standard would allow companies to measure financial assets and liabilities at fair value selected on a contract-by-contract basis. Companies will be required to display those values separately from those measured under different attributes on the face of the balance sheet.

Current GAAP uses different measurement attributes for different assets and liabilities, which can lead to earnings volatility. The proposal would also require companies to provide additional information that FASB said can help investors and other users of financial statements to more easily understand the effect on earnings and eliminates the need for companies to have to apply complex hedge accounting provisions.

Leslie F. Seidman, a board member and collaborator on the project, said in a statement that the proposal helps FASB achieve further convergence with the International Accounting Standards Board, which has already adopted a fair value option for financial instruments.

A copy of the complete proposal can be downloaded from FASB's Web site at . The comment deadline for the exposure draft is April 10, 2006.

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