Friday, October 10, 2008

FDI spillovers report

Copyright:majeye
The OECD has released their newest report on Foreign direct investment (FDI).

Here is the abstract from the report:

Foreign direct investment (FDI) represents an increasingly important dimension of international economic integration with global FDI flows growing faster than output over the past two decades. FDI is a particular form of investment, as it transfers knowledge as well as finance that may otherwise be unavailable in the domestic economy.



This paper uses firm-level data to identify FDI spillovers across countries, sectors and time. The analysis suggests that knowledge-related spillovers from FDI vary considerably across sectors. Services industries enjoy the strongest productivity-enhancing effects of FDI, particularly through backward linkages.

There is no strong evidence of horizontal productivity spillovers at the aggregate level. The results also indicate a significant and positive correlation between the degree of trade openness and output when measuring the impact of foreign presence in the domestic economy.

A positive interaction is found between trade liberalisation and productivity spillovers. Thus, trade liberalisation can be seen as an important component of any reform package designed to help countries maximise the benefits of FDI.

Credit crunch impacting retailers



Copyright: svilen001


The credit squeeze that culminated in a major financial meltdown last week has been impacting U.S. consumers, as well as retail businesses, throughout 2008.

According to a telephone survey of 100 CFOs at leading chains nationwidstudy by BDO Seidman, LLP, one of the USA’s leading accounting and consulting organizations:
  • Nearly half (41%) of CFOs at U.S. retailers have experienced a tightening of credit by their lenders
  • More than a third (37%) of the CFOs report a reduction of planned inventory purchases for 2008, further illustrating a difficult lending and economic environment
  • One-in-four (24%) of the retail CFOs cite that they have had, or plan to have, significant staff reductions in 2008. When looking at the top 100 retailers specifically, 32 percent of those CFOs are experiencing layoffs this year
  • 36 percent of the retail CFOs say that they have, or will, close stores in 2008, with 27 percent citing that they will close more stores this year than they did in 2007.
  • three quarters (77%) of CFOs have not or do not plan to delay store opening plans in 2008.
  • nearly a third (28%) of the retail CFOs stated that they are evaluating, or considering changing from U.S. accounting standards to IFRS
  • The majority (91%) of retail CFOs reported that the weak U.S. dollar has not increased their concern of being acquired by an international entity

October is in the Pink!

October is not just the "mooiste, mooiste maand" as Leipoldt referred to it, it is also International Breast Cancer awareness month.

Breast cancer is the 4th biggest cancer cause of death of South Africans, the 2nd biggest for women and the 18th biggest for men (remember 1% of breast cancer patients are men) and has overtaken cervical cancer as the most common cancer among women in South Africa.

As a survivor of a breast cancer scare last year, when I was diagnosed with a non cancerous tumor, I want to urge all my lecturers to regularly check your body for lumps and consult with your doctors immediately, because it is the only way to get peace of mind and the necessary treatment.

Here are a few websites with more information:

Thursday, October 9, 2008

ERSA's new papers




The Economic Research Southern Africa (ERSA) has released three new working papers:


Working Paper 94
Title: Nonparametric estimation when income is reported in bands and at points
Author(s): Martin Wittenberg
Abstract

We show how to estimate kernel density functions of distributions in which some of the responses are provided in brackets, by inverse probability weighting. We consider two cases, one where the data are CAR and where the data are not CAR. We show how the selection probabilities can be estimated by means of the EM algorithm without specifying a parametric distribution function for the variable. A Monte Carlo experiment shows that this procedure estimates the selection parameters fairly precisely. We apply these techniques to earnings data from South Africa’s first post-apartheid nationally representative survey, the 1994 October Household Survey.

Working Paper 95

Title: Perceptions regarding Entrepreneurship in an Emerging and Culturally Diverse Economy: A South African Survey
Author(s): John Luiz and Martine Mariotti
Abstract
Of all the developing countries that participated in the Global Entrepreneurship Monitor survey, South Africa was ranked the lowest, in terms of entrepreneurial activity. It is clear that South Africa is not producing a sufficiently entrepreneurial economy and this needs to be addressed so as to create employment, expand markets, increase production and revitalise communities. This paper examines the entrepreneurial traits of a diverse group of young adults in South Africa. It looks at their attitudes towards and perceptions of entrepreneurship, entrepreneurial opportunities and the broader environment.

Working Paper 96
Title: On the Real Exchange Rate Effects of Higher Electricity Prices in South Africa
Author(s): Jan van Heerden, James Blignaut and André Jordaan
Abstract
The paper uses a static Computable General Equilibrium (CGE) model of South Africa and simulates various shocks to the price of electricity. We attempt different closures to the model and compare their respective effects on the Consumer Price Index. In a CGE model, this is measuring the real appreciation of the exchange rate, or international trade competitiveness. In general, we conclude that electricity prices per se does not significantly influence the real exchange rate, regardless of which closure is used.

Support for IASB's reaction on the financial crisis


At their meeting in Beijing today, the Trustees of the IASC Foundation announced their unanimous support for the approach that the International Accounting Standards Board (IASB) laid out last Friday to accelerate its response to the credit crisis.
Under this approach, the IASB will seek appropriate language to eliminate any differences in how International Financial Reporting Standards (IFRSs) and US generally accepted accounting principles (GAAP) address the issue of reclassification of financial instruments. The Trustees support the IASB’s intention to complete this work by the end of next week. Read More

Wednesday, October 8, 2008

New books

For Finance & Investment:
  1. Advanced capital budgeting : refinements in the economic analysis of investment projects / Harold Bierman, Jr. and Seymour Smidt. New York, N.Y. : Routledge, 2007.

As always, if you want to take out this title, please let me know.

University news from the West


In Study Abroad, Dispute Over Roaming
Students and parents sue cell phone provider popular among study abroad participants, alleging unfair billing practices

Understanding Students Who Were 'Born Digital'
Authors of a new book talk about technology in the classroom, digital literacy and changes in the library.

Trickle-Down Economic Duress
Months of national fiscal strain have had little direct impact on colleges so far. As liquidity crisis intensifies, a few signs of actual distress begin to emerge in higher education.

Border-Crossing Universities
Europe is seeing new models for foreign institutions. In Britain, a Malaysian university opens to serve immigrant students.


The long and the short of it
Britain's one-year masters is proving a sticking point in the Bologna Process, but the equivalence issue is raising difficult questions about length of study for other degrees, too.

Lecturers fear anti-terror laws
Academics instruct students not to download sensitive material

Pass the exam hall to enter Dragons’ Den
Innovative assessment techniques are being used to challenge students.

REF could penalise those working across disciplines
Study says interdisciplinary researchers might lose out as their work is less cited

US: Poor students miss out in some universities
A new study by researchers at the University of California, Berkeley, has found that selective institutions in America differ markedly in the number of low-income students they admit. John Douglass and Gregg Thomson investigated the divide between poor and rich students, comparing a group of selective institutions and their number and percentage of Pell Grant recipients.

UK: Widening participation debate heats up Diane Spencer
The debate on widening participation in Britain's universities heated up last week with the publication of a report on special schemes to encourage pupils from poorer backgrounds to enter higher education, and inflammatory remarks by the Chancellor of Oxford University. Lord (Chris) Patten told a conference of independent school heads that his university should not be treated "like a social security office" to help disadvantaged pupils from state schools.

ROMANIA: Investment boost for higher education Karen MacGregor
Higher education in Romania has undergone huge changes in the past two decades, from a small and stifled sector during the communist era to a competitive system with seven times more students, more than 100 institutions and burgeoning research. There are challenges, including raising quality, but investment in higher education has increased 30-fold in the past seven years, says Professor Paul Serban Agachi, president of the academic council of Babes-Bolyai University and a member of a team that crafted reforms

JAPAN: University crime experts on call Gavin Blair
The second article in a special series on how universities are helping fight crime. Though the number of academic specialists in commercial crime in the Asia-Pacific region may be fewer than in the US or Europe, many of the leading figures are willing to work with corporate clients and have a great deal of experience outside the ivory towers.

FRANCE: Higher education and research are budget priorities Jane Marshall
Higher education and research are the government's chief priority in the 2009 budget. Next year's allocation will rise by EUR1.8 billion (US$2.57 billion) to a total of EUR24.16 billion, up 6.5% compared with 2008. But the sector has not escaped 900 job cuts although these are proportionally less severe than those imposed on other ministries.

UK: Teacher gender gap widens Diane Spencer
Despite government efforts to attract men into teaching, the latest figures show the gender gap is widening. The Higher Education Statistics Agency found that males made up less than a quarter of all teaching qualifications obtained from higher education institutions in 2006-07, the lowest number for five years.

EUROPE: Young scientists promise a bright future Alan Osborn
Three young researchers, from Poland, Slovakia and Britain, were awarded the top prizes in the EU Contest for Young Scientists in Copenhagen on 25 September, against competition from national scientific prize-winners from 39 European countries plus Brazil, Canada, China, Mexico, New Zealand and the US.


Economic Crisis Rapidly Changes MBA Education steven bell
Business schools are responding with counseling, classroom analysis, curriculum changes, and case studies to the convulsions that have led to the bankruptcy or fire sales of leading US financial firms and a federal bailout. At schools that have long funneled graduating MBAs to Wall Street, professors are teaching about the crisis, even as their students ponder what it will mean for their careers. Many longtime faculty members and administrators say they have never seen a series of events with greater potential to transform the focus of business education - and the career trajectories of their students.

iTunes University Lets IHEs Spread Their Messages steven bell
To keep up with the growing presence of all things online, universities are now aiming to reach students, prospective students, and anyone else with a love of learning through a forum that is both popular and recognizable. In other words, they're looking to iTunes. Conceived as a collaboration between Apple and various universities in 2004, iTunes U launched in the spring of 2006. The site, which began with only 16 institutions, has ballooned in recent months as more schools join up to post their content. Usage, too, is growing quickly.

Researchers Say Partial Lecture Notes Are Better For Students Than Full Notes steven bell
Course management software programs make it especially easy for instructors to provide students with a set of complete lecture notes. It seems that more instructors are doing this, as witnessed in the regularity with which students ask that the instructor’s notes be posted. But is giving students a complete set of notes a good idea? Based on their findings, these researchers recommend providing students with partial notes.

IMF releases



Here are the latest releases from the IMF:

Surveys
  • IMF Head Urges Greater Regulation of Financial Sector
    IMF Managing Director Dominique Strauss-Kahn welcomes the $700 billion rescue plan for U.S. financial markets to "put out the fire" engulfing the banking system, but says a broader global solution to the crisis is needed.
  • IMF to Launch Trust Funds to Support Technical Assistance
    The IMF plans to launch a series of trust funds to channel its technical assistance to specific policy topics. The menu-based Topical Trust Funds approach is designed to augment IMF resources already allocated to technical assistance.
  • Inflation Risks Remain Despite Slowing Growth
    Commodity prices will likely remain high and volatile, contributing to risks of second-round effects-such as wage hikes-across a range of emerging and developing economies, and further monetary policy tightening may be still relevant to contain these inflationary pressures, according to new IMF research.
  • Making Fiscal Stimulus Effective During Downturns
    A new IMF study finds that although fiscal policy is a potentially valuable tool for stimulating growth, it can easily do more harm than good if it is not implemented well. Tax cuts or spending increases that make debt unsustainable are likely to cause output to fall, not rise
  • Financial Stress Likely to Hit Real Economy Hard
    Episodes of financial turmoil that are characterized by stress in commercial and investment banks are more likely to be associated with severe and protracted economic downturns, according to new IMF research.
  • Lessons From Cross-Regional Analysis
    A new IMF study explores the patterns of current account balances of emerging economies-especially in Asia and Europe-and asks why they have become much more diverse in recent years and what those differences mean for external vulnerability.
  • Financial Crisis Likely to Worsen Economic Downturn
    The current financial market meltdown in the United States and other advanced economies will likely lead to longer and deeper economic downturns in some of these countries, according to new IMF research on the impact of the shocks on the world economy.

Working Papers

Summary: We describe unique aspects of microstates-they are less diversified, suffer from lumpiness of investment, they are geographically at the periphery and prone to natural disasters, and have less access to capital markets-that may make the current account more vulnerable, penalizing exports and making imports dearer. After reviewing the "old" and "new" view on current account deficits, we attempt to identify policies to help reduce the current account. Probit regressions suggest that microstates are more likely to have large current account adjustments if (i) they are already running large current account deficits; (ii) they run budget surpluses; (iii) the terms of trade improve; (iv) they are less open; and (v) GDP growth declines. Monetary policy, financial development, per capita GDP, and the de jure exchange rate classification matter less. However, changes in the real effective exchange rate do not help drive reductions in the current account deficit in microstate!

Summary: Inflation-targeting central banks have a respectable track record at explaining their policy actions and corresponding inflation outturns. Using a simple forward-looking policy rule and an assessment of inflation reports, we provide a new methodology for the empirical evaluation of consistency in central bank communication. We find that the three communication tools-inflation targets, inflation forecasts, and verbal assessments of inflation factors contained in quarterly inflation reports-provided a consistent message in five out of six observations in our 2000-05 sample of Chile, the Czech Republic, Hungary, Poland, Thailand, and Sweden.

Summary: Uganda has registered one of the most impressive economic turnarounds of recent decades. The amelioration of conflict and wide ranging economic reforms kick-started rapid economic growth that has now been sustained for some 20 years. But there is a strong sense in policy making circles that despite macroeconomic stability and reasonably well functioning markets, economic growth has not translated into significant structural transformation. This paper considers (i) Uganda's record of economic transformation relative to the high growth Asian countries and (ii) the contending explanations as to why more transformation and higher growth has proved elusive.

  • Working Paper No. 08/228: Determinants of Government Efficiency
    Summary: We compile the first large cross-country panel dataset of public sector performance and efficiency, encompassing 114 countries on all income levels from 1980 to 2006, with about 1,800 country-year observations for the education sector and about 900 observations for health. We regress these indicators on potential economic, institutional, demographic, and geographic determinants. Our most resounding conclusion is that higher government expenditure relative to GDP tends to be associated with lower efficiency in the respective sector. Moreover, we find that richer countries exhibit better public sector performance and efficiency, and that institutional and demographic factors also play a significant role.
  • Working Paper No. 08/229: Banks and Labor as Stakeholders: Impact on Economic Performance
    Summary: Traditionally, the impacts of the rights of financial institutions and workers on corporate performance have been analyzed independently. Yet, theory clearly indicates that the combination of relative powers of different stakeholders affects a firm overall performance. Using U.S. state level and state-industry level data, we investigate how output growth is affected by bank branch deregulation and employment protection occurring over 1972-1993. We find that financial liberalization positively impact overall state growth but greater workers' rights affects it ambiguously. At the industry level, however, employment protection promotes those industries that are more knowledge intensive, while the effect of financial liberalization does not differ across industries that vary in external financing dependency. The results hold controlling for changes in shareholders' rights, which itself is not significant. The findings suggest that financial liberalization operates mostl!
    y through an efficiency channel, better reallocating resources across sectors, while employment protection creates higher incentives and encourages more sector-specific, human capital investments. Overall, the results show that the strength of stakeholders' protection affects performance through efficiency channels and provide support for a stakeholders' view of corporate governance.
  • Working Paper No. 08/230: Garbage In, Gospel Out? Controlling for the Underreporting of Remittances
    Summary: Empirical studies that use self-reported data on remittances to measure the latter's impact on microeconomic incentives mostly ignore the potential errors associated with reporting/measurement issues. An econometric procedure to control for these errors is developed and applied to household-level data from Armenia. We find evidence of systematic under-reporting of remittances. After controlling for this, we find a strong negative impact of remittances on incentives to work.
  • Working Paper No. 08/226: An Anatomy of Credit Booms: Evidence From Macro Aggregates and Micro Data
    Summary: We study the characteristics of credit booms in emerging and industrial economies. Macro data show a systematic relationship between credit booms and economic expansions, rising asset prices, real appreciations and widening external deficits. Micro data show a strong association between credit booms and leverage ratios, firm values, and banking fragility. We also find that credit booms are larger in emerging economies, particularly in the nontradables sector; most emerging markets crises are associated with credit booms; and credit booms in emerging economies are often preceded by large capital inflows but not by financial reforms or productivity gains.
  • Working Paper No. 08/225: Current and Proposed Non-Oil Tax System in Azerbaijan
    Summary: This paper analyzes developments in non-oil tax policy, administration, and revenues in Azerbaijan, and suggests measures for further improvement. The main finding is that Azerbaijan's non-oil tax revenues increased significantly as a share of non-oil GDP in the last five years, but remain below potential. The non-oil tax revenue shortfall is mainly due to widespread exemptions, but there is scope for strengthening tax and customs administration. In the short term, expanding the tax base and better tax and customs administration will yield more revenues. In the medium term, more far-reaching reforms including reducing some direct tax rates, should be considered. The overall reform package could be made broadly revenue neutral by improving taxpayers' compliance and reducing exemptions.
  • Working Paper No. 08/227: Tax Reforms, "Free Lunches", and "Cheap Lunches" in Open Economies
    Author/Editor: Ganelli, Giovanni ; Tervala, Juha
    Summary: This paper focuses on the macroeconomic and budgetary impact of tax reforms in a New Keynesian two-country model. Our results show that both income and consumption unilateral tax rate reductions do not constitute a "free lunch", in the sense that they have negative budgetary consequences for the country which implements them. In addition, the degree of self-financing implied by our model is in the 8½-24 percent range. Since the degree of self-financing estimated in previous literature was larger, we conclude that in our model not only the "lunch" is not "free", but is also not that "cheap". A comparison of alternative (income-tax versus consumption-tax based) fiscal stimulus packages shows that consumption tax cuts imply a larger short-run impact on domestic output but the income tax cuts stimulate the domestic economy more in the long run. We also look at the implications of a revenue-neutral tax reform in which consumption taxes are increased to compensate for low!
    er income tax collection.

Country Reports

Policy Paper

  • The Macroeconomics of Scaling-up Aid: the Cases of Benin, Niger, and Togo
    Summary: In September 2007, the UN Secretary General launched the Millennium Development Goals (MDG) Africa Steering and Working Groups. The Steering Group brings together the leaders of multilateral institutions to identify practical steps needed for Africa to achieve the MDGs. The Managing Director of the IMF is a member of the Steering Group. The Working Group supports the Steering Group and is comprised of thematic groups in education, agriculture, health, infrastructure and trade facilitation, statistics, aid predictability, and MDG operationalization at the country level.
    The following three notes assess the macroeconomic implications of the spending of scaled-up aid to Benin, Niger, and Togo in line with that promised by the G-8 at Gleneagles, Scotland in 2005.

Extra

  • IMF Financial Activities -- Update September 25, 2008
  • Currency Composition of Official Foreign Exchange Reserves (COFER) -- Updated COFER tables include second quarter 2008 data. September 30, 2008

The Structure of Financial Supervision: Approaches and Challenges in a Global Marketplace


In July 2007, the Group of Thirty decided to launch a review of various national supervisory
and regulatory approaches and place them within the context of the changing global
financial system.

The study set out to look at the changes evident in the financial markets and the evolution of the national supervisory architecture at a time when central banks and supervisory agencies have been seeking to improve their supervisory processes in light of the blurring of lines between different financial sectors and businesses.

The review of 17 major national supervisory systems has confirmed that while dealing with similar problems and challenges, such systems are fashioned through a process that includes a myriad of political, cultural, economic, and financial influences.

Despite the many differences from country to country and market to market, the central bankers, supervisors, and government ministries are charged with overseeing financial institutions and dealing with threats to the stability of the financial system.

The Group of Thirty that assessed the strengths and weaknesses of a number of international regulatory systems. The conclusions of the study can serve as a framework for the coming debate over how best to reform our regulatory framework to mitigate and withstand future shocks.

As the discussion over financial services regulatory reform deepens, financial industry experts need to stay informed about the direction and future shape of their industry’s changing regulatory structure.

Monday, October 6, 2008

Africa's best books

Africa’s 100 best books of the 20th century is an exhibition currently on display the 6th floor foyer exhibition area of the Kingsway library.

Are you familiar with top 12 authors Naguib Mahfouz (Egypt), Meshack Asare (Ghana), Tsitsi Dangarembga (Zimbabwe), Ngugi wa Thiong’o (Kenya), Thomas Mofolo (Lesotho)?

Visit our exhibition and extend your knowledge and understanding of the great wealth of fiction and non-fiction written by Africans about their lives and societies in the 20th century.

SARB release



The SARB has released the following information:

M-banking in Africa

Copyright: kipcurry

According to an article published in Forbes, mobile banking in Africa have been revived by the extraordinary success of Kenyan cellphone operator Safaricom's M-Pesa money transfer facility
mobile banks in Africa faces some challenges:

--Take-up
Far from reaching the unbanked, m-banking services have largely been targeted at existing customers, and even in this case takeup rates have been low. Moreover, active use of accounts has tended to drop off and most customers limit their usage to airtime top-ups and person-to-person payments.
--Complex transactions
Despite the considerable technological advances in the past decade, using a mobile handset to conduct transactional banking remains considerably more complex than using an ATM. Easier technology and more customer education would be required for m-banking to develop mass appeal.
--Regulatory compliance
In developing new financial payments systems, cellphone operators have escaped the regulatory burden faced by banks because they do not, strictly speaking, take deposits. Any attempt by cellphone operators to move beyond cash transfers or purchases of prepaid products into providing a wider range of financial services would encounter this regulatory burden.

In addition to meeting liquidity reserves to protect depositors, cellphone operators would also have to comply with a bewildering and costly array of secondary legislation, including:
--know your customer (KYC) rules
--anti-money laundering regulations
--countering the finance of terrorism legislation

Electricity generated during August 2008

copyright: Scyza
StatsSA released the Electricity generated and available for distribution, August 2008 report.

Here are the main findings:
  • The estimated consumption of electricity in August 2008 decreased by 2,8% compared with August 2007.
  • Electricity consumed for the three months ending August 2008 decreased by 1,9% compared with the same three months a year ago.
  • In the first eight months of 2008, consumption of electricity was affected by numerous factors that led to reduced levels of consumption, such as load shedding and a continuous drive from Eskom in encouraging users to save on electricity consumption.
  • Furthermore, the estimated production of electricity in August 2008 decreased by 3,2% compared with August 2007.
  • The estimated production of electricity during the latest three months ending August 2008 decreased by 2,6% compared with the same period of 2007.

Corporate taxes and productivity/investments


The OECD released a paper Do corporate taxes reduce productivity and investment at the firm level? Cross-country evidence from the Amadeus dataset that uses a stratified sample of firms across OECD economies over the period 1996-2004 to analyse the effects of corporate taxes on productivity and investment.


Applying a differences-in-differences estimation strategy which exploits differential effects of corporate taxes on firms with different profitability, it is found that corporate taxes have a negative effect on productivity at the firm level.

The effect is negative across firms of different size and age classes except for the small and young, which may be attributable to the relatively low profitability of small and young firms.

The negative effect of corporate taxes is particularly pronounced for firms that are catching up with the technological frontier.

In the investment analysis, the results suggest that corporate taxes reduce investment through an increase in the user cost of capital. This may partly explain the negative productivity effects of corporate taxes if new capital goods embody technological change.

AISB responds to the credit crunch



The IASB is closely monitoring developments in the United States and other jurisdictions to avoid unnecessary inconsistencies in accounting treatments under IFRSs and US generally accepted accounting principles (GAAP).

In doing so, the IASB commits to undertake the following:
1. Consistency of fair value measurement guidance between IFRSs and US GAAP:
On 16 September, the IASB staff issued draft guidance on fair value measurement of financial instruments in markets that are no longer active.

The IASB notes the recent clarification made by the Office of the Chief Accountant of the US Securities and Exchange Commission (SEC) and the staff of the Financial Accounting Standards Board (FASB). The clarification is not an amendment of SFAS 157 Fair Value Measurements, but rather provides additional guidance for determining fair value in inactive markets.

The IASB staff has reviewed the clarification by the SEC and FASB staff and considers it consistent with IAS 39 Financial Instruments: Recognition and Measurement. (See here for the clarification made by the Office of the Chief Accountant of the US SEC and the FASB staff.)

The IASB will continue to ensure that any IFRS guidance is consistent with the clarification that has been provided by the US SEC staff and the FASB staff for those companies using US GAAP. This will help ensure comparability across borders.


2. Consideration of the possible impact of the US Emergency Economic Stabilization Act of 2008 and other similar programmes internationally on the valuation of assets and liabilities:
The IASB will work closely with the FASB to develop a common approach to issues related to the valuation of financial assets and liabilities resulting from purchases made through the US Emergency Economic Stabilization Act of 2008 and any other similar programmes internationally, if and when these programmes are initiated.


3. Immediate consideration of the ability to reclassify financial instruments:
The IASB notes that US GAAP permits entities, in rare circumstances, to reclassify financial instruments that are in the form of securities from their trading portfolio (measured at fair value with changes through the income statement) to ‘held to maturity’ (measured at amortised cost and subject to testing for impairment).

The IASB also notes that US GAAP permits some loans that are not securities to be transferred from Held for Sale (measured at lower of cost or market with changes through the income statement) to Held for Investment (measured at amortised cost and subject to testing for impairment). Provisions aimed at counteracting abuse apply to these reclassifications.

The IASB will assess immediately any inconsistencies in how IAS 39 and US GAAP practice address the issue of reclassifications and whether to eliminate any differences. The IASB will discuss these matters and will decide its position as part of its public meeting during the week of 13-17 October.

At that meeting the IASB will assess the suitability of adopting the US GAAP approach and whether adapting IFRSs will provide relevant information to users of financial statements. The IASB will also consider the potential need to counteract abuse resulting from the ability to reclassify financial instruments and related areas of accounting to ensure consistency between practice in the United States and in those jurisdictions using IFRSs.

4. Willingness to participate in any study on the impact of accounting in the credit crisis: The IASB recognises the need to continue to examine IFRS accounting principles for financial instruments. Earlier this year, the IASB published a discussion paper, Reducing Complexity in Reporting Financial Instruments . This discussion paper is the starting point for considering a possible replacement for IAS 39.


Working with regulators, investors, and industry, the IASB will draw lessons from the credit crisis as it moves forward with its project to reconsider IAS 39. Consistent with discussions in the United States, the IASB will be willing to assist in any study that examines the quality of existing fair value information provided to investors and any impact of financial reporting on the credit crisis.

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