RegulationAccounting StandardsFASB probes off-balance sheet rules

FASB probes off-balance sheet rules

FASB says it is still unclear whether the rules should be changed, disclosure requirements increased, or banks forced into stricter compliance with existing rules

US banks are to have their off-balance-sheet vehicles which contributed to
more than $150bn (£75.5bn) in writedowns scrutinised by the
standard-setter.

The Financial Accounting Standards Board wants to try to determine whether
the credit turmoil problems were a result of the accounting rules, the
disclosure requirements of banks or the way in which they complied with the
rules allowed,
Reuters
reported.

FASB chairman Robert Herz said it isn’t yet clear whether the rules should be
changed, disclosure requirements increased, or whether banks should be forced to
stricter compliance with existing rules.

‘Whenever you have a stress test like this in the market and people are
saying there are reporting problems, we need to understand the nature of those
problems and to what extent there’s something we have to change,” Herz said. ”
But we also don’t want to have blanket rules that make everyone consolidate
everything,’ Herz said.

Although the relevant accounting rules were created to limit
off-balance-sheet structures, following similar issues that led to Enron’s
collapse, banks found a way around these.

Further reading:

Financial regulation at the heart of the sub-prime
storm

US regulators to review off-balance packaged loans

Hewitt rattles investors by backing plans to hide debt

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