What to do about FAS 157?

The issue of fair value accounting and its importance was reflected in the TARP. Standard & Poor's notes that Section 132 of the TARP gives the SEC authority "to suspend the use of SFAS 157 ... if it deems it necessary or appropriate in the public interest." Section 133 requires that the SEC--with consultation from the Federal Reserve Board and the Treasury--study and report to Congress on the impact of FAS 157 regarding bank balance sheets, bank failures this year, alternative treatments and the like.

To some extent, the damage has been done. No one can go back and unmark the value of securities at Lehman Brothers. But there is a feeling that change is in the air--which may or may not be such a bad thing. S&P, for its part, has a sensible measure: Leave the standard in place but supplement the books with additional commentary and information.

For more:
- here's the story in Business Week

Related Articles:
TARP details emerge
FAS 157 wreaks havoc with bank earnings

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