"The Battle Continues over Mark-to-Market Accounting"

In September 2006, when the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 157, entitled “Fair Value Measurements” (“Statement 157”), its goal was to provide preparers, auditors and users of financial information with guidance that would promote increased consistency, comparability and more transparency in financial reporting. Statement 157 attempted to define “fair value” of a financial asset or liability and to establish a framework for measuring fair value under generally accepted accounting principles.  Several earlier FASB pronouncements, including Statement Nos. 115, 124 and 133, had provided competing definitions of “fair value” and contained only limited guidance for their application in measuring and reporting the value of an asset or liability on a company’s financial statements.

The Emergency Economic Stabilization Act of 2008 (the “EESA”), enacted on October 3, 2008 in response to the turmoil in the financial markets, mandates a study of Statement 157 and its possible contribution to the failure of a number of financial institutions. This Stroock Special Bulletin examines key issues regarding fair value accounting and its continued use.