International accounting rule-setters yesterday sought to defuse a row over the valuation of financial instruments that many politicians think is key to preventing another credit crisis. They are unlikely to succeed.

The International Accounting Standards Board (IASB), which sets reporting rules for companies in more than 100 countries, is proposing to simplify the rules that determine whether investments should be valued as long-term holdings or short-term trading assets.

Broadly, instruments with predictable cashflow, such as mortgages, would be held at cost, while more volatile assets, such as derivatives, would be valued at market prices.

The IASB has come under intense pressure to change the rules from European banks which blame the use of mark-to-market accounting for inflating their losses on thinly traded assets as a result of the financial crisis.

They argue they should be able to value such assets using their own internal models.

Many British accountants fear the French and German Governments are using the crisis to push for a separate European standards-setter.

That would unravel years of progress toward implementing global accounting standards.

As Adam Posen, the incoming member of the Bank of England’s Monetary Policy Committee, said yesterday, Britain is well ahead of other countries in disclosing the full losses from the financial crisis.

The suspicion is that European banks want to change the rules to avoid coming clean.

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