The FASB voted to adopt its most recently proposed changes to fair-value rules. The changes to mark-to-market accounting rules will now allow companies to use “significant judgment” when pricing certain investments in distressed or inactive markets. Analysts say the changes may reduce banks’ write-downs and goose Q1 earnings.
Congress had threatened FASB Chairman Robert Herz at a March 12 Senate hearing to change the fair-value rules or Congress would unilaterally. FASB came out with changes four days later, and fast-tracked them on a two-week comment period. Investors and accountants opposed the changes.
Arthur Levitt is chair of the Investors Working Group and commented “The group is deeply concerned about the apparent FASB succumbing to political pressures, which prevent U.S. investors from understanding the true obligations of U.S. financial institutions.”
A few reference points in the debate on fair value:
Arthur Levitt’s remarks to Congress
FASB Technical Accounting Advisory Group views on MTM
The long-running campaign by banks against fair value
Summary of the rule changes
Politics and Accounting
CFO Views on MTM
The Politics of Fair Value
A Warren Buffet Advisor’s View on MTM
Former SEC Chair Comments on Independence of Accounting Standard Setters