ebreen

New Accounting Practices Will Boost Bank Equity Values

The critical problem with mark to market theory is how it interacts with Sarbanes-Oxley and the present state of securities law. This issue is usually left out of the discussion as it has been here in your post. Mark to Market has always contained an alternate method of valuation when there is no functioning market provided the rational for the alternate value is fully disclosed in footnotes. However, in practice where SarBox has criminalized accounting practice that turns out to be overly optimistic and where the securities bar targets all grey area decisions, there is no reward for any CFO or Accountant Firm to apply any leway where there is some market value information, no matter how distorted that infrormation my be. There is simply too much risk..including the risk of personal freedom and liability...to apply an alternate risk adjusted mark to maturity value where there has been any reported market sale no matter the duress of that market sale. So, the real problem is SarBox defeats the flexibility of FSB 157 and causes a mark to non-market lowest value. SarBox is the law that needs the reform.