The Financial Accounting Standards Board said Wednesday that it would review fair-value accounting practices.
The board said it would examine its guidance on the practices, along with the disclosure of fair-value estimates, in response to a Securities and Exchange Commission (SEC) study on mark-to-market accounting.
The exams will account for changing market conditions and will address the issue of distressed transactions.
The disclosure examination will include a study on the "sensitivities of measurements to key inputs and transfers of items between the fair-value measurement levels," the board said.
Edward Yingling, the president of the American Bankers Association, said in a press release that the trade group welcomed the initiative but was still seeking clarity on "other than temporary impairment," the factor that determines when to mark down permanently an asset that has lost value as a result of market shifts. "The SEC twice recommended in its letter to the FASB on Oct. 14, and in its study of market value in January 2009 that the FASB re-examine OTTI 'expeditiously.' "The board said the exams would be completed by the end of the second quarter. New guidance could be issued in time for companies' yearend reporting.