The Financial Accounting Standards Board has issued three final staff positions on the recommended procedures for valuing securities.
FASB, Norwalk, Conn., has approved FASB Staff Position Financial Accounting Standard 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, along with an interim disclosures FSP and an FSP on other-than-temporary impairments.
FSP FAS 157-4 “reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive,” FASB Chairman Robert Herz says in a statement.
Advocates of the changes say current implementation of FASB securities valuation rules, which require some holders of some securities to “mark the securities market,” forces financial services companies to use the latest market price as the price of a security even when the market is not functioning properly.
Critics have argued that FASB rules already have given financial services companies some leeway in securities valuations, and that advocates of efforts to change valuation rules want to give companies the ability to “mark to myth.”