Fair value not to blame for the financial crisis and should not be dropped but FASB may have to cut down the number of models available for calculating write-downs on financial instrumentsThe US markets watchdog has given a tacit seal of approval to fair value accounting rules, but also urged standard setters to tighten up on the way impairments are calculated.
The Securities and Exchange Commission completed an in-depth probe into the controversial framework after being tasked with the job as a key part of the Emergency Economic Stabilization Act of 2008, the piece of legislation by which $700bn is to be pumped into the US economy.
The SEC said: 'Fair value accounting did not appear to play a meaningful role in the bank failures that occurred in 2008. Rather, the report indicated that bank failures in the US appeared to be the result of growing probable credit losses, concerns about asset quality, and in certain cases, eroding lender and investor confidence.
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