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FASB SEC closer to fair value accounting relief
WASHINGTON (10/2/08)—On day after clarifying its fair value accounting rules for mortgage-backed securities, the Financial Accounting Standards Board (FASB) Wednesday said it may issue additional guidance as early as this week about its mark-to-market standards, while the Senate may give the Securities and Exchange Commission (SEC) additional flexibility in the matter. In a meeting yesterday, FASB officials said the Statement of Financial Accounting Standards (FAS) No. 157, Fair Value Measurements, which establishes a framework for measuring fair value that applies broadly to financial assets and liabilities, needs additional guidance to provide clarity and assist in these unprecedented times. The expected FASB guidance will address, among other things, the relevant input, such as broker quotes or the use of pricing services, to determine fair value in an inactive market. FASB said it seeks to clarify Statement 157 and illustrate examples of how to determine the fair value of a financial asset when the market for that financial asset is not active. "The objective of the guidance is to clarify the framework within which financial statement users, preparers, auditors, and others are to determine the fair value of assets and liabilities when markets are not active,” said FASB. Many in the financial services industry, including the Credit Union National Association (CUNA), have urged additional FASB accounting guidance on fair value accounting standards. Meanwhile, the Economic Stabilization Act of 2008 passed last night by the Senate includes language that would allow the SEC to suspend the mark-to-market requirements for mortgage-backed securities. In certain instances, Generally Accepted Accounting Principles (GAAP) on fair value require assets to be marked to market. While credit unions are not supervised directly by the SEC, they are required to follow GAAP, and the suspension of these standards would impact the financial statements of credit unions with mortgage related instruments, according to CUNA Accounting Task Force Chairman Scott Waite, who also is senior vice president and chief financial officer at Patelco CU in San Francisco. Access more information from FASB using the resource link below.
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