FASB Releases 'Plain English' Statement On Fair Value Actions

This afternoon, FASB released a 'plain English' statement to journalists - supplementing its formal Summary of Board Decisions published on yesterday's FASB actions to finalize guidance on fair value in inactive markets, other-than-temporary-impairment (OTTI), and fair value disclosures. See FASB's 'plain English' summary. See also our coverage of yesterday's FASB board meeting and press conference. Broc Romanek gathered some links to recent coverage of FASB's action in his blog post today in TheCorporateCounsel.net blog, including a link to Jack Ciesielski's AAOWeblog. Ciesielski is a member of FASB's Investors Technical Advisory Committee (ITAC).

My two cents (these are my personal views, I remind you of the disclaimer which appears in the right margin of this blog): I think some corners of the financial press (print, TV, bloggers and the rest) have unfairly characterized the mark-to-market (fair value) debate into one of good and evil, where some observers view one or the other side of the debate as right or wrong, pushing or being pushed, good or evil.

That kind of coverage may generate 'buzz' but it over-politicizes the reality of what happened in terms of the action taken yesterday by FASB: actions which followed almost a year of public hearings around the world (as noted in FASB's press conference yesterday) including in relation to the financial crisis, as well as SEC's roundtables on mark-to-market, the recommendation that FASB act on fair value and inactive markets and OTTI which was included in SEC's Dec. 30, 2008 report to Congress, and the recommendation of FASB's own Valuation Resource Group at VRG's Feb. 5 meeting. This is not to say whether or not the FSPs are the be-all and end-all of the mark-to-market debate, but just that the actions taken by FASB were moving on a track toward releasing further guidance, but the nature of the push by members of Congress at the March 12 hearing on mark-to-market accounting may have replaced the train with a faster version, an Acela if you will.

I believe it is helpful that FASB put out a 'plain English' explanation of its actions taken, given news reports up to now have taken polar opposite views (and to some extent, probably still will, as people parse and apply the words in the new guidance) as to whether FASB Eases Fair-Value Rules Amid Lawmaker Pressure (Ian Katz, in Bloomberg, April 2) , or whether there will be Little Impact From FASB Fair Value Change: Analyst (Dan Wilchins, Reuters, April 2).

UPDATE: Those of you interested in chapter and verse, I posted a comment on Floyd Norris of the New York Times' Notions on High and Low Finance blog, in response to his post entitled, 'Integrity' and Standard Setting, in which I cite some specific paragraphs from FAS 157, Fair Value Measurement, which can be tied directly to the present projects to provide fair value guidance for inactive markets, and the linkage between FASB's words in the original standard, and their actions this week, would appear (to me, at least) to deflect those who say or imply that FASB 'caved' to political pressure (at least on the 157-e fair value guidance, if not the OTTI guidance). I started thinking about this when I read Suspending Mark-to-Market: Bad Policy, Bad Time in Andrew Ross Sorkin's Dealbook blog in the NYT earlier this week, which picks up an article by Richard Beales, U.S. Backtrack on Mark-to-Market Ill Timed, which appeared in BreakingViews.com on March 31; that article accused FASB of 'caving' to political pressure. I posted a similar comment on Larry Doyle's Sense on Cents blog, in response to his post Putting Perfume on a Pig, and he posted an interesting comment in response. Other blogs that have been following the fair value issue closely include Bill Sheridan in the Maryland Association of CPAs (MACPA) CPA Success blog. MORE: See also Laura Hay's post in the Ohio Society of CPAs Blog on April 3 entitled, The Politization of Accounting Standard-Setting.