WASHINGTON (1/2/09)—Proposed changes to Financial Accounting Standards Board (FASB) guidance on impairment and interest income measurement generally are an improvement over current rules for recognizing when a security is considered other-than-temporarily-impaired (OTTI), according to a comment letter from the Credit Union National Association (CUNA). Currently, there are two similar models for determining OTTI, but they do include some key differences. One of FASB’s primary objectives in issuing the proposed amendment is to increase consistency between the models, an objective supported by the trade group. The model addressed by this proposal is used to determine OTTI for low credit quality securities; this includes any mortgage-backed securities with such a credit rating. “Overall, we are encouraged by this (FASB staff position) and believe holders of securities covered by EITF 99-20 will benefit from these proposed changes in the current dislocated market, but we believe its long-term effects are less certain,” wrote CUNA Regulatory Research Counsel Luke Martone. The new FASB guidance would shift the determination of impairment from market participants’ assessment of cash flows to management’s assessment, a change backed both CUNA. Once determined as OTTI, however, the security would still be required to be marked down to fair value. Use the resource links below to access the comment letter.