National Post

U.S. accounting watchdog eases mark-to-market rules
National Post

The Financial Accounting Standards Board (FASB), pressured by U.S. lawmakers and financial companies, voted to relax fair-value accounting rules that Citigroup Inc. and Wells Fargo & Co. say don’t work when markets are inactive.

Changes to fair-value, or mark-to-market accounting, approved by FASB today allow companies to use “significant” judgment in gauging prices of some investments on their books, including mortgage-backed securities. Analysts say the measure may reduce banks’ writedowns and boost net income. Firms could apply the changes to first-quarter results.

House Financial Services Committee members pressed FASB Chairman Robert Herz at a March 12 hearing to revise fair-value, which requires banks to mark assets each quarter to reflect market prices, saying it unfairly punished financial companies. Financial shares rose after the FASB move. Citigroup rose 2.2 percent to $2.74 at 4:15 p.m. in New York Stock Exchange composite trading. Bank of America Corp. added 2.7 percent to $7.24. The KBW Bank Index earlier rose as much as 6.1 percent.

FASB’s vote was “long overdue,” Representative Spencer Bachus, the ranking Republican on the House Financial Services Committee, said in a statement today. “Financial institutions and community banks have been adversely affected by the rigid application of these rules during this financial crisis, causing further instability in the banking system.”