Agreeing that it would be much better if financial firms could just decide for themselves what difficult to value items on their balance sheet are worth if the price for similar assets in the market isn't satisfactory to them, FASB voted to grant Imaginationland powers to anyone with a balance sheet.
The changes to so-called mark-to-market accounting allow companies to use "significant" judgment when gauging the price of some investments on their books, including mortgage-backed securities. Analysts say the measure may reduce banks' writedowns and boost their first-quarter net income by 20 percent or more. FASB voted on the rules at a meeting today in Norwalk, Connecticut.
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 the rule unfairly punished financial companies. FASB's proposals, made four days later, spurred criticism from investor advocates and accounting-industry groups, which say fair-value forces companies to disclose their true financial health.
"I'm not sure how this system is going to survive if we cannot make up marks," commented an anonymous (and probably imaginary) FASB representative. (At least she looked like she was from FASB, she was wearing a FASB T-Shirt). Asked what relation to reality the marks bore she commented, "What is reality anyhow? Are you really here? Am I? How do you know your senses are not fooling you? What is the matrix? You have to realize not that the mark can be bent, but that there is no mark." Asked how FASB justified the vote she responded with "What is FASB really but a mental construct?" She begged off any other questions insisting that she had to catch a late double feature of Yellow Submarine and Heavy Metal.
FASB Eases Fair-Value Rules Amid Lawmaker Pressure [Bloomberg]