The US regulator is planning to issue new accounting guidance which is set to allow companies the opportunity to fully explain the massive losses they are forced to record under controversial accounting rules.

Sources close to the Securities and Exchange regulator said staff were drafting a letter which encouraged companies to make additional disclosures around writedowns and asset valuations in the footnotes and discussion sections of financial results.

Companies would include the disclosures to statements for the first quarter, the FT reported.

The new guidance stems from the regulator's interest in the writedowns which caused chaos on balance sheet and rocked share prices, causing companies to call for a suspension of the 'fair value' approach.

Wall Street executives have made the case that much of the recorded losses, recorded under fair value rules, will never materialise because the assets will not be sold until their value recovers.

Further reading:

Watchdogs push for accounting rules review

IASB defends use of ‘fair value’ accounting