By McPherse Thompson, Assistant Financial News EditorTHE FINANCIAL services industry said Jamaica does not have a credible mechanism to value financial instruments and therefore it would be premature to apply International Accounting Standards (IAS) to that area before an appropriate measure has been put in place.
However, the Institute of Chartered Accountants of Jamaica (ICAJ), the regulatory body for the profession, said that while it understood the concerns, it would continue to hold talks with the securities dealers rather than delay the implementation.
CLASSIFICATION
The ICAJ had mandated all listed companies to be IAS compliant by June 30, this year, but IAS 39, which relates to the classification of financial instruments and fair value measurement, has continued to generate much debate and concern among industry interests.
IAS 39 requires that the best determination of fair value is the published price quotation in an active market, where the appropriate quoted market price for an asset held is the current bid price.
Securities dealers said that with the volatility in interest rates in Jamaica however, the application of IAS 39, without an appropriate valuation methodology, could result in a substantial reduction in their capital base.
President of the Jamaica Securities Dealers Association, Peter Chin, said there was concern among numerous investors including pension fund managers and others holding fixed rate instruments, but they were holding discussions with the ICAJ with a view to arriving at an agreed valuation methodology. "We need to come up with a valuation method that will reflect the true value of the securities," he said, noting that under IAS 39, it was the going market rate rather than the true value that had to be reflected in the accounts.
NO UNIFORM METHOD
Don Wehby, chief financial officer of Grace, Kennedy & Company, has also pointed out that "in Jamaica, we don't have a uniform method of valuation of financial instruments so it would be premature to implement IAS 39 at this time."
He said that as a member of the Private Sector Organisation of Jamaica (PSOJ) and a director of Grace, Kennedy, "I am in full support of IAS. It is necessary if we are going to compete in the global environment, but the Jamaican situation is unique, in that, we have no valuation method for valuing financial instruments."
ICAJ president, Garth Kiddoe, said they understood the concerns of securities dealers, with whom they met earlier this year regarding implementation of IAS 39. However, he said the ICAJ has decided to proceed with implementation pending dialogue with the interest groups.
SUITABLE SYSTEM
In the meantime, he said, the ICAJ has been working with securities dealers and an international data processing company in an effort to develop a suitable system that will be acceptable to dealers as well as the Financial Services Commission (FSC), the regulatory body for securities dealers.
"We continue to be in discussions with the securities dealers," said Mr. Kiddoe, noting that the FSC and the Bank of Jamaica were also actively participating in the process.
The ICAJ adopted IAS effective July 1, 2002, requiring all local companies whose financial reporting periods started on that day of after to prepare their financial statements in accordance with those standards.
