New accounting standards and the controversy surrounding them have placed special demands on treasury software developers.
The British Bankers Association (BBA) reacted quickly and with some vehemence to the publication 'Financial Instruments and Similar Items' published by the Accounting Standards Board (ASB) in December 2000.
The ASB proposes far-reaching changes in accounting for financial instruments:
a) all financial instruments should be measured at fair value,
b) all gains and losses arising from changes in fair value should be recognised in the income statements in the periods in which they arise,
c) special accounting treatment for financial instruments used for hedging is not allowed.
The ASB view is very well supported as it incorporates the draft standard of the Joint Working Group of standard setters, which includes representatives from the USA, UK, Germany and the IASC.
While it is crystal clear to the treasurer how financial instruments should be measured, the reaction from the BBA, which doesn't support fair value accounting, shows that the accounting representation of financial instruments is still a matter of considerable debate.
These moving goalposts are a special challenge for builders of treasury software.
EuroCash have responded by building a fully featured treasury accounting function, starting from the journal entries triggered by a financial deal, through accrual, revaluation, trial balance into the income statement and balance sheet.
The user can define the desired accounting treatment whether using IAS 39, FASB 133 or the new fair value accounting standard proposed by the Accounting Standards Board.
This software, which is available from February 2001 onwards, is sold as a module of the EuroCount treasury software, but is also available to other international treasury software developers for incorporation into their packages.
The conceptual framework draws on the forthcoming book 'Accounting for Derivatives' by Drs. Coje Schmidt, RA, MCT, to be published by Euromoney Publications Plc, in which the financial and the accounting perspectives are linked in a practical manner for an audience of treasurers, accountants and software developers.