Fair value measurement needs 'further work'

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30 Oct 2008

In his opening remarks at the US Securities and Exchange Commission's roundtable on mark-to-market accounting yesterday, SEC Chairman Christopher Cox said that the SEC will be considering, among other things, the impact fair value accounting standards have on the quality of financial information provided to investors, the FASB's process for developing accounting standards, and whether existing fair value measurement guidance should be modified or be replaced by an alternative approach.

The roundtable is part of the Commission's Congressionally-mandated study on the use of mark-to-market accounting by financial institutions. Click to download Chairman Cox's Opening Remarks (PDF 32k). Chairman Cox also announced that a follow-up roundtable will be held on 21 November 2008. An excerpt:

As we have learned, illiquid markets bring new challenges to the measurement of fair value that may not have been fully appreciated in past years. These challenges have brought into focus the need for further work on improving the tools that companies have at their disposal to achieve transparent, decision-useful financial reporting.

Transparency is the cornerstone of world class financial reporting. Transparent and unbiased financial reporting allows investors to make informed decisions based upon a company's financial performance and disclosures. A clear, concise, and balanced view into the companies that participate in our capital markets is fundamentally important to those who choose to invest in our markets. Informed decision making results in efficient capital allocation.


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