FASB Eases Fair-Value Accounting Rules Amid Lawmaker Pressure
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By Ian Katz
April 2 (Bloomberg) -- The Financial Accounting Standards Board, pressured by U.S. lawmakers and financial companies, voted to relax fair-value rules that Citigroup Inc. and Wells Fargo & Co. say don’t work when markets are inactive.
The changes approved today to fair-value, also known as mark-to-market, allow companies to use “significant” judgment in valuing assets to reduce writedowns on certain investments, including mortgage-backed securities. Accounting analysts say the measure, which can be applied to first-quarter results, may boost banks’ net income by 20 percent or more.
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FASB gives firms more leeway in valuing assets
Accounting board gives companies more leeway in valuing assets, starts in current quarter
Thursday April 2, 2009, 9:09 am EDT
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WASHINGTON (AP) -- The board that sets U.S. accounting standards is giving companies more leeway when valuing assets, providing a potential boost to battered banks' balance sheets.
The independent Financial Accounting Standards Board voted to adopt new guidelines under the so-called mark-to-market accounting rules, which require companies to value assets at prices reflecting current market conditions.
The changes will allow the assets to be valued at what they would go for in an "orderly" sale, as opposed to a forced or distressed sale. The new guidelines will apply to the second quarter that began this month.
The mark-to-market rules have forced banks to take steep write-downs on some assets, especially securities tied to high-risk subprime mortgages. |
