Despite the ongoing controversy surrounding the US mark to market accounting rules over recent months, legislators have thus far refused to give up on them. Last week, the chairman of the US Senate Banking Committee, Christopher Dodd, confirmed that the rules would be modified but the underlying standards would remain in place.
The rules have been particularly controversial with regards to the valuation of distressed assets held by failing US financial institutions. In acknowledgement of this fact, the Securities and Exchange Commission (SEC) recently took the decision to allow financial institutions to exclude hard to value assets from the mark to market rules.
The SEC is also working with the Financial Accounting Standards Board (FASB) to produce guidelines for the industry with regards to valuing assets when there is little or no trading going on in the market. The accounting rules are, after all, based on market prices and if these are not attainable, another method must be in place to value these assets.
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