SEC continues fair value investigation

Christopher Cox, SEC chairman

A second testing roundtable on the future of fair value accounting will take
place today in Washington as the US financial watchdog, the Securities and
Exchange Commission, investigates what it should do about the controversial
accounting principle.

Among those attending will the IASB’s vice chairman Tom Jones but also on the
panel will be Dane Mott the JPMorgan analyst who was among the first to defend
fair value when it apparently came under attack in the US rescue package pushed
through Congress at the end of September.

Mott, along with colleague Sarah Deans in London, was among the first to
declare that blaming fair value, as many US politicians and businessmen had
done, was simply ‘shooting the messenger’.

Before that Mott had already written in a research paper that ‘blaming fair
value accounting for the credit crisis is a lot like going to a doctor for a
diagnosis and then blaming him for telling you that you are sick’.

In September after the rescue package Mott and Deans wrote: ‘The reality is
that fair value accounting and enhanced disclosures have helped markets quickly
identify where problems exist and react to those problems.’

The review of fair value was ordered in the legislation that created the
rescue package. It also reiterated the SEC’s power to suspend fair value if it
wanted to.

Attendees at the first SEC roundtable at the end of October heard that giving
up on fair value now would be ‘counter-productive’.

SEC chairman, Christopher Cox, has already endorsed International Accounting
Standards which places fair value at the heart of many of its standards.

The International Accounting Standards Board has been under attack, both in
Europe and the US, for its determination to stand by fair value accounting.

US watchdog hears fair value is ‘much needed’

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