The potential weakening of mark-to-market accounting is bad policy at a bad time, BreakingViews says.
The Financial Accounting Standards Board’s hurried rule changes for reporting financial asset values looks like a rush job under bank-led political pressure. It will also confuse investors — the group supposed to benefit from accounting standards — at an already volatile moment.
Many politicians and pundits blame fair-value accounting rules, also often called mark-to-market rules, for worsening the current crisis. Attaching distressed market values rather than a higher historical cost or long-term recovery value to financial assets, they say, has caused financial institutions’ capital cushions, as reported to investors, to collapse, unnecessarily overstating the risk of insolvency.
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