By MARTIN CRUTSINGER
The board that sets U.S. accounting rules will conduct two new studies on the issue of mark-to-market accounting, the standard that critics contend has deepened the banking crisis.
Robert H. Herz, chairman of the Financial Accounting Standards Board, said Wednesday the new studies followed recommendations from the Securities and Exchange Commission in its recent report on the rules.
One of the FASB studies will review the guidelines used for applying mark-to-market accounting, including addressing such issues as when the market for a particular asset is not active. The other study will make recommendations aimed at improving disclosures.
"The SEC expressed continued support of fair-value accounting in its study, but recommended consideration of potential improvements surrounding the application of fair-value principles," Herz said in a statement.
Mark-to-market, or fair-value, accounting requires banks to carry assets, such as mortgage-backed securities, on their books at their current values. Critics contend this has made the current financial crisis worse by forcing banks to slash the value of assets that have been severely depressed by market conditions.
Herz said the accounting board hopes to complete the study on improving guidance for applying the rules by the end of June. He said the aim is to complete the project in time for the recommendations to be used for year-end financial reporting.
The American Bankers Association welcomed the decision of the accounting board to launch the two studies but the group complained that the efforts did not go far enough to bring U.S. rules on mark-to-market more in line with the accounting standards that foreign competitors operate under.
"U.S. companies are needlessly required to report higher on-paper losses than their international competitors," said ABA president Edward Yingling.
The Obama administration's overhaul of the $700 billion financial bailout program announced last week did not include any proposal to modify the mark-to-market rules during. Some analysts said that omission contributed to the market's big plunge immediately after the plan was unveiled by Treasury Secretary Timothy Geithner.
Mary Schapiro, tapped by President Barack Obama to head the SEC, noted earlier this month that the agency had recently recommended retaining the accounting rules.
When asked during her first public appearance as SEC chairman on Feb. 6 to comment on speculation the rules might be suspended as a form of relief during the financial crisis, Schapiro said the commission had recommended retaining them with only possible revisions around the margins.
source :The assosiated press
