Mark-to-market accounting has merit, but financial institutions need better clarity on its application for very distressed assets, Securities and Exchange Commission Christopher Cox said Monday.

Mr. Cox, speaking at a conference of accounting professionals, stopped short of calling on the Financial Accounting Standards Board to shelve mark-to-market accounting, blamed by some for the credit turmoil. Instead, he said the accounting board needs to give more clarity to address the industry's concerns.

The SEC is finishing up a congressionally mandated study — due Jan. 2 — which examines the impact of mark-to-market accounting on financial institutions' balance sheets.

"The work we have already done suggests that the accounting standard-setters could improve upon the existing security impairment models," Mr. Cox told the American Institute of Certified Public Accountants.

"Investors have … clearly indicated a view that the current concept of mark-to-market accounting increases the transparency of financial information provided to investors — but that in inactive or illiquid markets, additional guidance would be useful to promote reasonable application of the standards."

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