Calling for a fresh look at current mark-to-market financial reporting rules, Paul Volcker, a top economic adviser to President-elect Obama, has signed off on a financial-reform program more sympathetic to bankers’ views than the current Financial Accounting Standards Board’s fair-value regime has been thought to be, according to a report by CFO.com.
Indeed, the report on stabilizing the financial system that the Group of 30, which Volcker chairs, issued yesterday, seems likely to reopen what has been a furious debate between banks and investors on the value of market-to-market accounting in a time of extreme illiquidity. And it does so just as the debate seemed to be have been resolved in favor of investors.
Over the past year, bankers and investor groups have hotly contested the validity of the new fair-value accounting regime ushered in by Financial Accounting Standard No. 157, which spelled out how companies should measure the fair value of illiquid assets and liabilities as well as liquid ones.
Speaking at a press conference in New York on Thursday that introduced a report on financial reform issued by the Group of 30, an international body of prominent finance officials and economists, Volcker questioned, however, “whether a naive, across-the-board application of mark-to-market accounting [is] suitable for regulated institutions.”