Counter effort begins to halt mark to market suspension plan

US think tank the Centre for Audit Quality has urged Congress to abandon efforts to suspend mark to market accounting as the proposal continues to play a central role in rescue plans for the economy in Washington.

The Hank Paulson plan reiterates powers of the US financial watchdog to suspend mark to market while an alternative rescue package from a Republican minority group calls directly for suspension.

A CAQ letter addressed to members of Congress says: ‘The principles of mark to market accounting are rooted in the fundamental virtue of transparency and are central to informed market decisions and efficient allocation of capital.

‘In our view, investor confidence would be undermined by efforts designed to mask the actual value of financial assets at a given point in time.’

CAQ insists that mark to market did not cause the crisis but contributed to knowledge about its severity.

Yesterday, shadow Tory chancellor George Osborne called for the suspension of mark to market for three months making him the latest politician to believe an accounting standard is a contributing factor to the financial crisis.

Mark to market has, however, received much support from regulators around the world. The politicisation of the requirement has gathered pace as business leaders in ailing institutions have intensified their calls for a change to the rule.

Currently both the US standard setter FASB, and its internantional counterpart, the IASB, have projects underway reviewing fair value, though both have stood by the valuation method emphatically so far.

However, expert observers believe the issue lays in disclosure and consolidation of the balance sheet rather than valuation under fair value.

More:

Tories call for UK fair value suspension

Centre for Audit Quality

Gavin Hinks' blog: mark to market madness