U.S. Senators Johnny Isakson, R-Ga., and Saxby Chambliss, R-Ga., today praised this morning's action by the Financial Accounting Standards Board to give auditors more flexibility in valuing certain assets that have long-term value, and Isakson and Chambliss urged the board to apply the same flexibility to all real estate assets.
"This is a good step in the right direction by FASB, and I hope they will apply this same flexibility to real estate assets as well," Isakson said. "Mark-to-market rules have devastated the evaluation of real estate assets held by community banks. Mark-to-market should not be an arbitrary write-down to zero; it should be a recognition of the transition of values in a down market or in an up market."
"This economic crisis is not going to be resolved overnight and certainly not by any single remedy," said Chambliss. "However, today FASB has helped move our financial institutions toward greater stability by loosening the accounting rules required of them. Relaxing the mark-to-market rules will provide a more accurate portrayal of the long-term fiscal health of our financial institutions."
Isakson and Chambliss have repeatedly called for reform of mark-to-market accounting rules that they believe are disproportionately penalizing American banks. The rules require the banks to assign a value to an asset based on the current market price for the security or a similar asset, and banks have complained that the rules are penalizing in cases in which they have viable assets if held to term or liquidated over time.
The Financial Accounting Standards Board, which is known as FASB and is authorized by the Securities and Exchange Commission to set the standards of financial accounting and reporting, today voted unanimously to allow banks and their auditors to use "significant judgment" when valuing certain illiquid securities.