Zero Hedge

Cover of Financial Accounting

Zero Hedge: "The newsflow from D.C. over the next two days will make the lives of capital markets participants very exciting. Among the key expected news items is the rumored (temporary) abandonment of Mark-To-Market accounting principles, which caused quite a market rally on Thursday of last week. So as we prepare to say goodbye to the last relic of what was once an efficient market, it might make sense to reevaluate just what it is in the current accounting rules that is so inconvenient for the administration and Wall Street. Among these, chief is the Statement of Financial Accounting Standards No. 157 (here for the full 158 pages of FAS 157) as well as its lesser known cousin, FAS 115.

FAS 157 was fast-tracked for adoption in Q1 2008, with a simple goal: to streamline the valuation of an increasing plethora of hard-to-evaluate securities to a 'Fair Value' price. FAS 157's mission statement is the following:

This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However,"

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