NEW YORK CITY-Taking an “if it ain’t broke, don’t fix it”approach, the CRE Finance Council gives a thumbs-down to proposedchanges in the accounting treatment of derivative instruments,impairment modeling and hedging activities. “We believe that thecurrent approach, which is based on an entity’s business strategy,works well and is not in need of major changes,” the council saysin a comment letter to the Financial Accounting StandardsBoard.

In its Sept. 30 comment letter, signed by president LisaPendergast and CEO Dottie Cunningham, the council says it “stronglybelieves” that the FASB and International Accounting StandardsBoard should work together “to produce a single standard for theaccounting for financial instruments that is based on the current‘business model’ approach,” rather than the “two very differentstandards” they’re working toward. Further, the group says theFASB’s proposed changes “do not represent an improvement infinancial reporting and that the costs of implementing themsignificantly outweigh any perceived benefits.”

Specifically, the finance council doesn’t agree with the FASB’sproposal to apply fair value to loans and other instruments thatare intended to be held for realization of yield, on grounds that“fair value accounting would not appropriately reflect the entity’sbusiness strategy in those instances. Further, we believe that fairvalue accounting actually detracts from our market participants’focus on sustainability of operating cash flows.” Any changes tothe current approach, according to the council, should be limitedto modest tweaks of the impairment model.