26 Nov 2009

DIY valuations not a good idea - Bancorp

7:29 am on 26 November 2009

Financial risk management firm Bancorp is warning that a failure by firms to get third-party valuations may undermine the confidence of investors and lenders.

Companies use derivatives to hedge themselves against volatile financial instruments such as exchange rates and interest rates, and under new international accounting rules these must be valued and reflected in firms' accounts.

Most valuations are done by firms themselves, or by their banks.

But the executive director at Bancorp Treasury Services, Earl White, says that that's not enough, and that independent valuations are needed to improve the transparency of capital markets.

Mr White says regulators, a category that includes auditors, the Securities Commission and the stock exchange, need to take a strict and consistent approach to valuations in order to maintain credibility with the money markets.

He says when the standards were applied in the United States, a couple of major organisations were made to restate their accounts.