The Securities and Exchange Commission (SEC) in the US have rejected a banking industry push to suspend accounting rules that force banks to value assets on their balance sheets at current market prices even if they plan to hold them for years.
The SEC issued a report to Congress that recommended maintaining so-called mark-to-market rules, but suggested improvements to current accounting practices. The report addresses the following six key issues:
- The effects of such accounting standards on a financial institution's balance sheet;
- The impacts of such accounting on bank failures in 2008;
- The impact of such standards on the quality of financial information available to investors;
- The process used by the Financial Accounting Standards Board in developing accounting standards;
- The advisability and feasibility of modifications to such standards; and
- Alternative accounting standards to those provided in such Statement Number 157.
Proponents of the rules argued that suspending them would weaken transparency in companies' financial statements, hurting investors and the capital markets.
Critics said the regulations mandated write-downs that failed to reflect the true value of mortgage-linked assets and the prices they might fetch in the future.
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