Dow Jones Newswires reports in the Wall Street Journal that European Union industry ministers Thursday agreed to introduce modernized accounting rules aimed at bringing E.U. companies in line with international capital markets.
The rules introduce the “fair value” accounting method and are meant to accommodate the widespread use of derivatives and international accounting standards, the E.U. Commission said in a statement.
The changes also define which companies can be required to use “fair value” in addition to historic cost accounting, which will remain the basis of accounting valuation on items like fixed assets and long-term debt, the Commission said.
The fair value of financial instruments is determined by market value or generally accepted valuation model. Nearly all changes in fair value, whether realized or not, need to be shown on a company’s profit and loss account.
-By Fiona Harney; Dow Jones Newswires; 322-285-0134; [email protected]