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Fair value is subject of new FASB projects
WASHINGTON (2/19/09)—In what appears to be at least a step in the right direction for credit unions, the Financial Accounting Standards Board (FASB) announced Wednesday the addition of four new FASB agenda projects addressing fair value accounting. FASB Chairman Robert Herz said the projects are intended to improve the application guidance used to determine fair value and disclosure of fair value estimates. Credit Union National Association Accounting Task Force Chairman Scott Waite greeted the FASB announcement enthusiastically. CUNA that requested FASB provide additional guidance on fair value accounting. “During my last meeting with the FASB board and in subsequent conversions, I have strongly urged addressing these issues before June. Addressing Fair Value Measurement and (other-than-temporarily impaired assets) OTTI in illiquid and inactive markets is imperative to address very quickly,” Waite said. He is senior vice president and chief financial office of Patelco CU in San Francisco. He added, “I’m ecstatic to see that both areas have been added to the agenda and will be addressed near term. CUNA and I will continue to advocate with the FASB the urgency and positions important to credit unions.” CUNA is currently analyzing the FASB announcement and will provide guidance for credit unions. Some credit unions have experienced serious reductions in capital as a result of the application of fair-value accounting to certain assets and CUNA continues to seek relief. CUNA President/CEO Dan Mica recently expressed CUNA's "strongest support" for efforts to address accounting rules on fair value and other-than-temporarily impaired (OTTI) assets in a letter to Senate Banking Committee Chairman Christopher Dodd (D-Conn.) The FASB fair value projects address four main topics:
* Application guidance on determining when a market for an asset or a liability is active or inactive; * Application guidance on determining when a transaction is distressed; * Applying fair value to interests in alternative investments, such as hedge funds and private equity funds; and * Improving disclosures about fair value measurements.
FASB anticipates completing the first three topics by the end of the second quarter of 2009, and the fourth topic in time for year-end disclosures. The FASB release reminded that it is also working with the International Accounting Standards Board (IASB) on a comprehensive project to improve, simplify, and converge the accounting for financial instruments.


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