The American Bankers Association (ABA) released a white paper that outlined concerns over the expansion of mark-to-market accounting and the lack of due process and divergence between the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on projects relating to financial instruments. 

“What the accounting boards are discussing now would be the biggest accounting change we've ever seen,” said Donna Fisher, ABA’s senior vice president of tax, accounting and financial management. “We are deeply concerned that the shortcuts being taken will result in flawed or inconsistent rules.”

ABA expressed concern that the standard setting process is being compromised, partly because IASB’s timeline for completion might not allow U.S. companies to have a chance for appropriate due process in providing input.

“If the IASB finalizes its rule on accounting for loans and debt securities prior to the FASB finalizing its rule, FASB will have to adopt the IASB’s rules or adopt a different rule which would result in divergence between U.S. GAAP and international rules,” the white paper stated. “The goal should be improving the current accounting rules that are in need of repair within a time frame that provides for due process and strives for international convergence.”

In the white paper, ABA took aim at recent proposals that call for an expansion of mark-to-market accounting in financial statements. Bankers have long supported mark-to-market accounting for assets that are actively traded, but have opposed it for most of the traditional loans that banks make.

“Given the role that mark-to-market has played in exacerbating the current economic crisis, it is hard to understand the rational for expanding it at this time,” Fisher said. “Mark-to-market accounting lacks a sufficient level of reliability, which the current market has demonstrated.”

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