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SEC, FASB Answer Demands for Guidance; Banks Rejoice

Tammy Whitehouse | October 1, 2008

While Congress regroups on a federal bailout plan, regulators are answering urgent demands for interpretive guidance on fair value measurement, issuing views the banking sector so far is cheering. The Securities and Exchange Commission and the Financial Accounting Standards Board issued a joint four-page Q&A late Tuesday that offers its views on how to value assets where market activity has frozen; FASB also plans to fast-track more formal staff guidance to elaborate. They’re answering urgent demands for how to interpret the requirements of Financial Accounting Statement No. 157 Fair Value Measurements as they pertain to the evaporation of market activity for specific assets.

The joint SEC/FASB guidance says management’s internal assumptions, such as expected cash flow, can be used to measure fair value when market evidence has disappeared. “Statement 157...

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