The board that sets U.S. accounting standards on Thursday gave companies more leeway in valuing assets and reporting losses. The changes should help boost battered banks' balance sheets and financial stocks rallied on Wall Street, but the rules may undercut a new financial-rescue program. Full Story »
Posted by Dwight Rousu
The accounting board action is reported, along with some of the significant effects. Two dissenting votes are noted out of the five. Alternatives that might have been adopted are not discussed.
These "mark to magic" rules give irresponsible "gambling" banks too much opportunity for fanciful accounting. At least an independent assessment of value should be required.
The changes, … , will allow the assets to be valued at what the banks project they might sell for in the future, rather than in the current, distressed environment. More »
It's a good presentation of a couple of the issues involved in the new standards. One issue that it leaves out - maybe because it's an unknown - is how many banks would appear to be bankrupt themselves if they had to put current nonexistent market value on their toxic assets. And I assume, that would mean FDIC would have to close them and pay off their depositors unless buyers could be found?
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