SEC to issue guidance over securities valuation

Regulators are planning to issue guidance next week to address the investor
concerns over the values of instruments that companies hold, amid markets that
have seized up.

The Securities and Exchange Commission is set to tell companies that while
they must stick to market prices for instruments, even when these figures paint
an unfavourable picture, they will also be permitted to project a wider range of
possible values for those securities.

Investors, however, are worried that companies could use the opportunity to
blur the big losses suffered during the recent sub-prime turmoil where even safe
securities were hurt by mortgage defaults.

Barney Frank, chairman of the House Financial Services Committee said there
is an urgent need to look at mark-to-market accounting because of it’s ‘downward
pull’ on the economy, the Wall Street Journal reported.

Frank said he is in touch with regulators and will hold a hearing when
Congress returns from break next month.

Companies are also expected to be allowed to explain how they arrived at
values, especially in cases in which there is no longer an active market, and
therefore an absence of a pricing model.

Further reading:

SEC to
widen range for asset valuations

FASB probes off-balance sheet rules

Moody’s drops auditor PwC

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