• TSX -91.48tumbling from its highest level in more than 5 months as commodity shares turned lower and Chrysler's bankruptcy filing weighed on the market's mood.
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• Dollar +.69c to 83.82USD
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• Canadian 5 yr bond yields +.00bps to 2.01- Four weeks ago it was 1.82. http://www.financialpost.com/markets/market_data/money-yields-can_us.html
*The yield, the rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield (and the decrease in spread) is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise.
Canada splits with U.S. on accounting rules
Eoin Callan, Financial Post
Canada is splitting with the United States and aligning with Europe over how much discretion to give banks when they value distressed assets on their books.
The decision was confirmed Thursday by the Canadian Accounting Standards Board and marks a decisive shift by the country to align with international rules rather than move in lockstep with the U.S. sector.
The stance was affirmed despite an intensive lobbying effort by Bay Street to level the playing field with U.S. banks, to which Washington granted extra leeway in April.
Chief executives of the country's largest banks had sought political intervention from the highest level and made direct personal appeals to Jim Flaherty, the Finance Minister.
They asked Mr. Flaherty to use his influence during private one-on-one conversations with the Finance Minister, said people familiar with the discussions.
Ottawa subsequently brought pressure to bear on standard-setters, according to a person familiar with the matter.
But those efforts fell short in the face of appeals from the accounting industry and advocates for financial analysts and investors not to copy the unilateral action taken by Washington.
The Canadian body did, however, make a significant concession to Bay Street that lobbyists cheered as a victory.
After previously insisting it would avoid a piecemeal approach to setting rules about how companies' handle their books, the Canadian Accounting Standards Board Thursday said it had "decided to revise its standards on impairment of debt instruments."
The changes will allow banks more flexibility when valuing financial assets classified as "held-to-maturity" or "loans and receivables".
The body said the fresh rules would be circulated for comment and would "narrow the differences with new U.S. requirements".
The board said the rules brought Canada into line with the approach of the London-based International Accounting Standards Board.
The alignment with international rules was welcomed by the Canadian Advocacy Council (CAC), which represents financial analysts and investor interests.
Blair Carey, an analyst with the CAC, said that the "most important thing in the big picture" was that Canada was still moving towards global rules rather than "U.S. methods."
But he said the interference from Ottawa was "unwelcome and problematic".
Brad Smith, a financial analyst at Blackmont Capital, said: "Changing anything like this on the fly is always dangerous."
He added the compromise could ultimately undermine confidence in the Canadian financial system.
"Any moves towards a subjective, influence-driven way of doing things tells you the system is still broken," he said.
Vincent Papa, senior policy analyst at the Chartered Financial Analysts Institute, said the precise wording arrived at by rule-setters would leave auditors vulnerable to pressure to acquiesce to the demands of chief financial officers at banks seeking to avoid costly writedowns.
Canadian banks have recorded about $20-billion in losses on financial assets during the course of the credit crisis but avoided the heavier writedowns booked by foreign peers
Friday, May 1, 2009
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