SEC worries over abuse of accounting rules
Watchdog increasingly concerned about manipulation by financial companies
The SEC has warned auditors about the use
of improper selling designed to take advantage of a new accounting rule known as
the ‘Fair Value Option’ or FAS
159.
FAS 159 allows companies to record the value of a financial instrument on
their balance sheets based on the price the instrument could fetch in a current
market transaction.
The SEC is concerned that some banks and other financial companies may see
this as one-off opportunity to run losses through retained earnings on their
balance sheets, rather than their more visible income statements, Reuters
reported.
Further reading
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SEC meeting to discuss Sarbanes-Oxley changes
SEC censures E&Y over accounting work for US bank
