I had mentioned this in my earlier blog "FAS 157 results in naked shorts selling ". Now in the latest manifestation of the heavy flak flying around fair value, critics have been emphasizing the great power that the Securities and Exchange Commission will have — to suspend mark-to-market accounting "for any issuer" and to launch probes into its role in the current financial crisis.
The bailout bill debated yesterday in Congress included sections giving the SEC power to suspend mark-to-market accounting "for any issuer" and to launch a probe into the question of whether it contributed to the crisis. Though the bailout plan has been rejected, the bill shows the concerns of the SEC towards this new rule.
Under the securities laws, the SEC would have the authority to "suspend, by rule, regulation, or order, the application of Statement Number 157 of the Financial Accounting Standards Board for any issuer...if the Commission determines that is necessary or appropriate in the public interest and is consistent with the protection of investors," according to Section 132 of the bill.
Further, Section 133 of the legislation would empower the SEC to launch a study of the effects of 157 on financial institutions, including depository institutions. The study would mull the effects of the standard on bank balance sheets; the impact of fair-value accounting on this year's bank failures; and how mark-to-market affects the quality of financial information provided to investors.
The FASB reacting to the heat it has to take from the legislators and bankers decided to postpone its webcast on FAS 157 which was scheduled for a 11 AM US time run yesterday. The eagerly awaited FASB was to discuss various issues on the implementation of FAS 157
Well the markets took a tanking yesterday with DOW (n) over 600 points, will the regulators stand up and ban FAS 157.
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