FASB acts to ease US bank profit worries

The US accounting standards setter has brought out proposals that could help prop up banks’ profits by changing the way some long-term assets can be valued.

Alongside new guidance on fair value measurement rule FAS 157, which suggested companies should not use fire-sale prices to value financial assets during a downturn, the Financial Accounting Standards Board put out a staff position that would change how companies value ‘other-than-temporary-impairments’ on assets they have no plans to sell.

The position could ease the hit that OTTI charges have been making on the P &L statement as it will let companies split credit and non-credit losses, with the latter moving into other comprehensive income and out of the company’s total earnings calculation, according to CFO.com

The proposals split the board, with two of the five members against such a position, but pressure from US lawmakers for action from standards setters to ease the crisis may have played its part in the approval of the guidance.