Financial institutions, regulators and finance ministers worldwide have, this year, been pressing the International Accounting Standards Board (IASB) to relax its rules on fair-value accounting. The rules force banks and others to value their assets at current market prices. Asset holders argue that in times of illiquid and falling markets it is difficult or impossible to value assets accurately. Fair-value accounting is resulting in assets being valued at distressed sale prices, rather than at their fundamental value, creating a downward spiral. The IASB has countered that any relaxation in the fair value rules would cloud the picture for investors and regulators and could sow the seeds of the next crisis. But last month it made a significant amendment to the rules.
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