The Securities and Exchange Commission studied, listened, and did nothing about mark-to-market accounting. That’s the result of a Congressionally mandated study on the subject released last week by the SEC ahead of its due date. The commission found that “investors generally believe fair value accounting increases financial reporting transparency and facilitates better investment decision-making,” according to the study. The mark-to-market process “did not appear to play a meaningful role in the bank failures that occurred in 2008,” it continues. What caused the financial market distress? The SEC blames “growing probable credit losses, concerns about asset quality, and in certain cases, eroding lender and investor confidence.” Spurred by what, one wonders.
In any event, the report recommends some fine-tuning of the mark-to-market rules. Among other things, it calls for “development of additional guidance and other tools for determining fair value when relevant market information is not available in illiquid or inactive markets,” improved “disclosure and presentation requirement related to the effect of fair value in the financial statements,” and “examination by the FASB of the impact of liquidity in the measurement of fair value, including whether additional application and/or disclosure guidance is warranted.”