Thursday, April 2, 2009

CFA comments on FASB's easing of the fair-value rules

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. FASB approved the changes during a meeting in Norwalk, Connecticut.

The easing of mark-to-market accounting rules by the Financial Accounting Standards Board helped spur markets Thursday. The board approved most of its proposals made a couple of weeks ago, despite criticism from some investor groups. Lawrence Smith, a member of the FASB, addressed concerns that the board had bowed to pressure from the banking industry and lawmakers. "We are an independent standard setter, and it's important that we maintain our independence," Smith said. But he added that the board cannot "ignore what's going on around us." Patrick Finnegan, director of the Financial Reporting Policy Group at the CFA Institute, shared his thoughts on the FASB's decision.

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