The release of a preliminary paper last week endorsing fair-value accounting has moved the Financial Accounting Standards Board a step closer to adopting the controversial method of valuing assets and liabilities.

Banks and the FASB have battled over the concept for nearly a decade. To the FASB, fair-value accounting is the key to unlocking the secrets of bank balance sheets, a common-sense tool that investors could use to determine the true current value of a loan, derivative, security, or deposit. Under fair value, an item's worth is equivalent to the price it would fetch on the open market.

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