Another thing passes our desk.
The FASB has finally spoken.
This one is from John Carney
A myth. Which sounds like a fitting description of what the Financial Accounting Standards Board is proposing to introduce onto the books of companies holding "distressed" assets. Today the FASB, which sets U.S. accounting rules, proposed allowing companies to exercise more judgment in determining if a market for an asset is active and if a transaction is "distressed."
At its heart, it's not a crazy idea. If an asset can be fairly expected to spin off more cash than current market values imply, it makes sense to allow for accounting adjustments. It is possible that a bundle of mortgage backed securities, for instance, could suffer from an irrationally low price if a temporarily market dislocation was caused by a liquidity squeeze. Marking these to market could create a false impression of their underlying value.
The FASB has finally spoken.
This one is from John Carney
A myth. Which sounds like a fitting description of what the Financial Accounting Standards Board is proposing to introduce onto the books of companies holding "distressed" assets. Today the FASB, which sets U.S. accounting rules, proposed allowing companies to exercise more judgment in determining if a market for an asset is active and if a transaction is "distressed."
At its heart, it's not a crazy idea. If an asset can be fairly expected to spin off more cash than current market values imply, it makes sense to allow for accounting adjustments. It is possible that a bundle of mortgage backed securities, for instance, could suffer from an irrationally low price if a temporarily market dislocation was caused by a liquidity squeeze. Marking these to market could create a false impression of their underlying value.
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