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Who Benefits from FASB Accounting-rule Changes? | PowerOptions Web Log
The Financial Accounting Standards Board’s (FASB) mark-to-market rule requires firms to report the fair-market value of their assets on a quarterly basis. The valuation is based on the sales price fair market price of equivalent assets. Opponents of mark-to-market contend that in illiquid markets, mark-to-market unduly penalizes companies by making them write-down their assets, thereby exposing them to more financial risks as a result of the unfavorable valuations that result from the ensuing depressed prices. Proponents on the other hand believe that the fair market price is a true reflection of the value of the asset at the time. Banks that advocated for the changes to FASB 157-e argued that the absence of a market for collateralized debt obligations, such as mortgage-backed securities significantly impaired their ability to do business, hence making it more difficult for them to recover from the economic slow down. Some banks proposed a replacement of...