ABA Welcomes FASB's Decision To Review Measurements For Fair Value Accounting
( American Bankers Association )
(February 18, 2009)
Feb. 18, 2009
ABA Media Contact: Jonathan Snowling
ABA WELCOMES FASB'S DECISION TO REVIEW
MEASUREMENTS FOR FAIR VALUE ACCOUNTING
Expresses Concern that OTTI is Being Overlooked
by Edward L. Yingling, ABA president and CEO
"The American Bankers Association welcomes the Financial Accounting Standards Board's decision to take a fresh look at estimating mark to market values in illiquid markets. However, we are concerned that critical problems regarding Other Than Temporary Impairment (OTTI) are being overlooked.
"The current market has demonstrated how unreliable "mark to market" accounting can be, and there are various views about how best to estimate market values. We are pleased that FASB has initiated a project to review and reconcile the process for estimating market values in illiquid markets.
"However, we are disappointed that FASB ignored the need to more directly repair the problems regarding OTTI in the projects announced today. The SEC twice recommended - in its letter to the FASB on October 14, 2008 and in its study of market value in January 2009 - that the FASB re-examine OTTI "expeditiously." ABA has made the same recommendation.
"The international model for OTTI used by the International Accounting Standards Board, which is based on credit impairment rather than fair value, represents a superior approach to current U.S. Generally Accepted Accounting Principles (GAAP). As a result, U.S. companies are needlessly required to report higher on paper losses than their international competitors. The trigger for determining OTTI in the U.S should be based on actual credit impairment and the accompanying mark down should be made for the amount of that credit impairment as opposed to marking it to market. Recoveries of impairment should be reversed through earnings, as they are for international accounting.
"ABA has consistently pushed for immediate repairs to "mark to market" accounting since March 2008 and we continue to believe that these improvements need to be made promptly. FASB needs to act more expeditiously than their stated estimate of completion for June 2009.
"ABA will continue to work with the FASB and the SEC to identify problem areas and ways to improve not only the guidance itself, but also the various interpretations of the guidance that are problematic in practice."
The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation's banking industry and strengthen America's economy and communities. Its members - the majority of which are banks with less than $125 million in assets - represent over 95 percent of the industry's $13.6 trillion in assets and employ over 2 million men and women.