The International Accounting Standards Board has proposed requiring companies to provide additional disclosures on all their investments in debt instruments, other than those classified in the fair value through profit or loss category.

The proposals, in the form of proposed amendments to IFRS 7, "Financial Instruments: Disclosures," would require an entity to state in tabular form the fair value, amortized cost and amount at which the investments are actually carried in the financial statements. The amendments would also require a company to disclose the effect on profit or loss and equity if all the debt instruments had been accounted for at fair value or at amortized cost. The U.S. Financial Accounting Standards Board is making similar disclosure proposals.

"We continue to act swiftly in dealing with accounting issues that have arisen as a result of the crisis," said IASB Chairman Sir David Tweedie (pictured) in a statement. "Enhanced disclosures for investments in debt instruments will provide greater transparency and help to regain investors' confidence in the financial markets."

The proposals are set out in an exposure draft, "Investments in Debt Instruments," on which the IASB invites comments by Jan. 15, 2009.

Earlier this week, the IASB also published for public comment proposals for clarifying the accounting treatment for embedded derivatives. The IASB said it was responding to requests asking for the IASB and FASB to clarify the requirements in IAS 39, "Financial Instruments: Recognition and Measurement and IFRIC 9 Reassessment of Embedded Derivatives."

The IASB came under pressure in October to amend IAS 39 to allow banks to reclassify some of their assets (see Pressured IASB Chairman Considered Resigning). Participants in a recent roundtable, however, asked the IASB to prevent any diversity in practice developing as a result of the amendments. The new proposals would require all embedded derivatives to be assessed and, if necessary, separately accounted for in financial statements.

"In October 2008, in response to exceptional circumstances, the IASB amended accounting standards relating to the reclassification of financial instruments," said Tweedie. "Issuing that amendment without normal due process always carried the risk of unintended consequences, and these proposals seek to clarify the application of that amendment to embedded derivatives."

The proposals are set out in an exposure draft, "Embedded Derivatives," on which the IASB invites comments by Jan. 21, 2009.

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