1. CIA Annual Meeting Assemblée annuelle de l’ICA
June 29 & 30, 2006 Ÿ Les 29 et 30 juin 2006
Ottawa, Ontario
CICA 3855: OSFI Comments – Helmut Engels

2. OSFI Guideline D-10
AcSB included Fair Value Option in its new financial instruments standard
Is consistent with international IASB standard
Except it did not include a subsequent IASB amendment

3. OSFI Guideline D-10
The IASB amendment limits the use of FVO to situations where:
It eliminates or significantly reduces an accounting mismatch, or
A group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management strategy.

4. OSFI Guideline D-10
Guideline D-10:Accounting for Financial Instruments Designated as Fair Value Option Gives additional guidance from OSFI
Purpose is to introduce the IASB amendment to Canadian financial reporting
2 Concerns:
Are fair values reliable and consistent?
Are fair values based on sound internal management practices?

5. OSFI Guideline D-10 Reliable Fair Values:
Most reliable are liquid, tradable assets
Published quotes for similar sizes, risks, etc.
Valuation techniques

6. OSFI Guideline D-10 FVO not allowed for:
Loans and mortgages to companies with gross annual revenues of less than $62.5 million
Loans and mortgages to individuals
Surplus Assets

7. OSFI Guideline D-10
OSFI expects all institutions using the FVO to meet the supervisory expectations set out in Principles 1 – 4 of the Basel Committee’s Supervisory guidance on the use of the fair value option for financial instruments by banks.
OSFI intends to follow principles 5 – 7 in assessing risk management, controls and capital adequacy related to the use of the FVO.

9. CIA Annual Meeting Ÿ Assemblée annuelle de l’ICA
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