PositionBrief Article

The draft proposal for a Parliament and Council Directive aims to modify Directives 78/660/EEC and 83/349/EEC on valuation. Currently, companies are generally required to value their assets at purchase price or production cost - what is commonly referred to as historic cost. The proposal will introduce a new requirement for Member States under which they will have to permit (and may in fact require) all or some categories of companies to value "certain financial instruments" in their accounts at fair value. The instruments affected will be most financial assets and some of the financial liabilities on a balance sheet. Member States will be able to limit the application of fair value accounting to consolidated accounts only. They can also limit it to financial instruments held only for trading purposes.Where a company adopts fair value accounting, then all derivative financial instruments will have to be valued in the balance sheet at fair value. Some derivatives that...

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