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FASB Loosens Mark-to-Market Rules. Finally

April 2, 2009 RSS Feed Print

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Market-to-market, the accounting rule that ate Wall Street, has finally been relaxed. The changes from FASB, applicable to first quarter earnings, allow companies to use “significant” judgment when valuing assets. That will reduce writedowns on certain investments, including mortgage-backed securities. All in all, it could boost banks’ net income by at least 20 percent. Maybe or more. But let me give you another number: $30 trillion. Those are global stock market losses as a result of the financial crisis, and that includes the recent rebound which, I believe, can be greatly attributed to signs the rule would be loosened. Not pushing this change earlier is what Team Obama should be apologizing for at the G20 summit, if anything.

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“The FASB today made some difficult decisions on challenging issues related to fair value accounting in an economic climate unlike any other in memory for most Americans," Barry Melancon, AICPA CEO and President said. "Now all participants in the financial reporting system have an obligation to move forward and provide the most transparent and reliable information on hard-to-value assets so that our capital markets can use that information to allocate capital efficiently,” Melancon said.
“Likewise, we encourage all participants in the financial reporting system, including regulators, to exhibit a strong spirit of cooperation as financial statement preparers and auditors use reasonable, good-faith judgment when valuing and auditing financial assets in illiquid markets,” Melancon said.
“Independent, private-sector standard setting of accounting is critical to a free-market economy and everyone involved in the financial reporting system should be committed to that principle. We unequivocally support FASB’s continuing independence,” Melancon emphasized.
“We understand that not all stakeholders will be happy with the outcome. AICPA committees have expressed their reasonable and well thought-out views on both sides of this proposal by FASB,” he said.
More information is available at http://www.aicpa.org/MediaCenter/

Bill Roberts of DC 12:50PM April 03, 2009

does not need to "apologize" for anything.
Team Obama did not cause the over-use of mark-to-market. Why are you not yelling at the accountants who run FASB?

Muser of NM 11:14AM April 02, 2009

FASB Loosens Mark-to-Market Rules. Finally

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