SEC worries over abuse of accounting rules

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

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

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