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Fair Value Effects Knock On

New accounting requirements and the aftermath of the credit crisis are likely to increase treasuries' use of valuation platforms.

By John Hintze | Updated on October 01, 2010

The push by accounting regulators to measure assets and liabilities at fair value may soon expand the reporting duties of treasurers. And while plenty of valuation platforms already exist, not all will meet treasurers’ needs. Valuation platforms sprang up after the Financial Accounting Standards Board (FASB) issued new requirements in the late 1990s on reporting the value of derivatives in either the profit-and-loss (P&L) section of the income statement or in other comprehensive income (OCI), which lies outside the P&L. The vendors include giants such as Thomson Reuters and Bloomberg, and smaller players focusing on hedge accounting, such as Reval and Chatham Financial.

Proposed amendments to that standard and another, more recent FASB proposal clarifying the notion of fair value would require most financial assets and liabilities, including those not hedged by derivatives, to be reported in P&L; if certain tests were met, the change in fair value would be reported in OCI.

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