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The Actuary The magazine of the Institute & Faculty of Actuaries

Fitch focuses on fair values

A recent report by Fitch ratings has highlighted the need for improved fair value disclosures as part of the ongoing fair value debate.

The adoption of fair value accounting standards has coincided with sharp falls in the market value of sub-prime and other debt-related instruments. Recent market turmoil has also emphasised the difficulty of valuing assets in illiquid markets.

The report, entitled Fair Value Disclosures: A Reality Check, found that the degree of reliability and the assumptions underlying fair value measures were key issues for analysts of 2007-2008 accounts.

“The new fair value disclosures are obvious improvements compared to prior disclosures but do not go far enough,” said Olu Sonola, director at Fitch Ratings Credit Policy Group. “Investors and analysts need better and more extensive disclosure around fair value measurements.”

Fitch’s analysis was based upon a review of 2007 annual reports and 10-Ks of the world’s largest banking groups.

The full report is available on the Fitch Ratings web site at www.fitchratings.com