The Financial Accounting Standards Board couldn't come to agreement on a system of market value accounting for investment securities, and instead will see if problems with historical amortized cost accounting can be resolved.

"I don't view this as a repudiation of the market value project," said Robert C. Wilkins, director of the project. "I think the most productive thing is to revisit the problems of historical cost accounting, so board members will be reminded again of the opportunities and difficulties that exist there."

Financial institutions and their regulators have opposed market value accounting for investments, but the Securities and Exchange Commission is pressing FASB hard to come up with accounting rules that require it.

The proposal on the table last week, Wilkins explained, was a combination of a pro rata method with a method under which liabilities that were linked to assets would be valued to market. FASB earlier had decided not to mark liabilities to market, but drew criticism from the financial institutions.

Under Wilkins' proposal, firms could, but would not have to, identify liabilities specifically related to investment securities as part of a liability management plan.

Wilkins said the issue probably would be taken up at the June 24 meeting.

What the financial institutions fear is that market valuation of investments would produce wide fluctuations in their earnings during periods of market volatility. In fact, the financial institutions argue, the investments are made for the longer run, and short-term changes in their value shouldn't be reflected in their earnings.

Meanwhile, the riskbased capital guidelines being developed by the bank and thrift regulatory agencies will require the institutions to keep a market-based balance sheet in addition to the historically required balance sheet done using generally accepted accounting principles.

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