The Financial Accounting Standards Board has adjusted two sensitive rules to reflect current market conditions, much to the relief of the U.S. banking sector.  FASB approved a redo of its fair-value, mark-to-market rule. Under the revision, the value of assets in an airless, inactive market “is the price that would be received to sell the asset in an orderly transition (that is, not a forced liquidation or distressed sale) “between market participants at the measurement date under current conditions (that is, in the active market).”

FAS 157-e also clarifies and includes “additional factors” for deciding whether trading volume has evaporated; and eliminates the “proposed presumption that all transactions are distress (not orderly) unless proven otherwise.” In other words, banks have quite a bit of leeway in putting a value on some of those asset-backed securities stored in the containment vessel.

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