The general consensus of the panel was that fair value accounting under Statement 157¹ is not the root cause of the current market turmoil. Panelists indicated that regulators should look beyond Statement 157 to address some of the issues prevalent in practice today, such as changing the regulatory capital requirements. In addition, the panelists voiced strong support for independent standard setting, noting that the process needs to be free from any political or regulatory intervention.

Impairment guidance The panelists agreed that standard setters should revisit other-than-temporary impairment guidance. Several suggestions were made, including (1) to align the guidance for impairment of investments in debt securities (Statement 115²) with the guidance for loan impairments (Statement 114³) and (2) to segregate impairment loss between credit and other changes in fair value. Panelists from the investor and auditor community suggested a model in which credit loss on debt securities would be recognised currently in income, and other changes in the fair value of the instrument (the plug) would be recognized in other comprehensive income. The credit loss would be calculated on the basis of changes in expected cash flows in a manner similar to the Statement 114 model. Several panelists from the preparer community suggested that the investments should be carried at amortised cost so that only losses associated with credit are recognised and the fair value of the instrument is disclosed in the notes to the financial statements on a quarterly basis. They indicated that recognising liquidity losses in other comprehensive income distorts equity, which affects regulatory capital requirements.

Additional disclosures Panelists agreed on the need for (1) more comprehensive disclosures that may include forward-looking information (such as sensitivity analysis) and (2) detailed discussion of techniques and inputs used by management to estimate fair value. Certain panelists suggested that additional disclosure requirements should be provided by regulators or standard setters before year-end financial reporting.

Presentation Panelists agreed that improved income statement presentation of fair value measurements would enhance the transparency and usability of financial statements by the investor community and that the FASB should consider improving financial statement presentation as part of a long-term project.

¹FASB Statement No. 157 Fair Value Measurements
²FASB Statement No. 115 Accounting for Certain Investments in Debt and Equity Securities
³FASB Statement No. 114 Accounting by Creditors for Impairment of a Loan