Panel Asks for Fair-Value Freeze

The Committee to Improve Financial Reporting, created by the Securities and Exchange Commission to explore ways to improve the accounting system is expect to recommend a freeze on new accounting standards that require fair-value accounting when it issues its final report on Friday, according to a report by Financial Week.

The draft final report said the mixed-attribute model—in which some assets and liabilities are measured using fair value, while others are measured using historical cost—is complex and sometimes confusing. The principle, which requires companies to mark assets to market prices has been controvercial. Some argue that it has hastened financial problems on Wall Street by requiring firms to drastically mark down assets when there is virtually no market to use to set a price.

Also controversial is the committee's recommendation that companies will no longer have to restate financial reports so long as the accounting errors are not material. Groups including the AFL-CIO and the Consumer Federation of America voiced concerns that this move would allow companies to obscure or ignore past errors.

Among other recommendations, according to Financial Week, eliminating industry-specific accounting guidance, as well as mandating the inclusion of an executive summary in corporate annual statements.

The committee has one final vote on recommendations this Thursday, after which it will release its final report.