A survey of both users and preparers of financial institution accounting statements expressed great skepticism that market value accounting will produce reliable results.

"It's nice to see an independent study that supports what bankers have been saying about market value accounting," said Donna Fisher, manager of accounting policy for the American Bankers Association.

The ABA and other financial institution trade associations plus thrift and bank regulators have opposed the effort of the Financial Accounting Standards Board and the Securities and Exchange Commission to require market value reporting for financial statements.

The survey was prepared by KPMG Peat Marwick for the Association of

Reserve City Bankers. It focused on Financial Accounting Statement 107, issued late last year by FASB, which requires financial institutions with assets of more than $150 million to begin disclosing the market value of their financial instruments in footnotes as of Dec. 15. The ABA tax and accounting committee met July 17 with FASB to request a delay in implementation of FAS 107.

The disclosure requirement is part of a comprehensive project on financial instruments. That project has been divided into several parts, including the controversial effort to require market value accounting for securities. FASB moved along on that portion of the project when it reached a compromise July 15 that would permit reporting at amortized cost securities management intends to hold to maturity (see The Mortgage Marketplace, July 20. page 1).

The survey found that information on credit quality and problem assets was the most important but the least reliable category currently disclosed. Some users aid market valuation would improve that information. but only one of 31 respondents specified market valuation when asked how reporting could be improved.

Users were opposed to adopting market value accounting as the primary basis for accounting statements. though they favored supplementing current reporting with fair value information. Preparers expressed pessimism about the usefulness of market value accounting. Most did not believe that historical cost accounting supplemented by market value disclosures (as required under FAS 107) would generate useful and understandable information for users.

Though the existence of a secondary market in residential mortgages should make valuation simpler for those investments. the survey found, there still is a problem with subjectivity in estimating future cash flows and discount rates.

Overall, the financial statement users said they would prefer disclosure of more detalied information on credit quality, problem assets and certain off-balance sheet items.

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