“FASB Leaves Mark-to-Market Rules Unimpaired”

At a meeting on April 2, 2009, the Financial Accounting Standards Board (“FASB”) met to revise the guidance for identifying inactive markets and distressed transactions and determining whether an investment be considered as other-than-temporary impaired.  These revisions apply to fair value accounting under U.S. generally accepted accounting principles.

Fair value accounting, often referred to as “mark-to-market” accounting, has been blamed for exacerbating the current financial crisis by forcing banks and other financial institutions to write down the value of their holdings of corporate debt, structured investments and equities.  Whether or not the criticisms of fair value accounting have been valid, FASB came under tremendous pressure in the past year to change the mark-to-market rules. 

This Stroock Special Bulletin reviews certain of the actions taken by the FASB at its recent meeting in revisiting the mark-to-market rules.