The SEC today announced the launch of a study to consider modifying mark-to-market accounting requirements.
The study, mandated by a provision in the $700 billion rescue legislation for financial institutions, will, among other things, examine the impact that the accounting requirement had on bank failures this year, according to an SEC news release.
In addition, the study will consider what impact the accounting standard has on the quality of the financial information available to investors. Some federal lawmakers want to suspend the accounting requirement, contending that it is artificially depressing asset values on the balance sheets of financial institutions. But advocates say the requirement provides valuable information to investors.
The SEC provided guidance on the requirement Sept. 30 that clarifies that company managers can use estimates to value securities for which there is no active market under existing mark-to-market requirements.
James Kroeker, the agencys deputy chief accountant, will serve as the studys staff director. The study, which is supposed to include consultation with the Treasury Department and the Federal Reserve, is supposed to be completed by Jan. 2, 2009.