Academic journal article ABA Banking Journal

Market-Value Accounting Could Have Been Worse

Academic journal article ABA Banking Journal

Market-Value Accounting Could Have Been Worse

Article excerpt

Accountants aren't known for their sense of humor. As one CEO put it, "I don't generally like to hear laughter coming from my accounting department."

Bankers aren't laughing much, either, after the Financial Accounting Standards Board decided in April to require banks to value certain securities at current market prices.

"This is more than just an accounting change," said Donald G. Ogilvie, ABA's executive vice-president. "It will change the way banks conduct their business and the fundamental role they play in the economy."

A partial victory. Market-value accounting was a long time coming. ABA supported and worked for changes that eventually made the rule more workable. The association supported a change, for example, that will allow unrealized gains and losses to go to equity rather than income. Indeed, had ABA and the banking industry not gone to bat over this issue, the change could have come even sooner than the effective date of Jan. 1, 1994, and been even less acceptable to the industry.

The opponents of market-value accounting have included the banking industry, led by ABA, the banking regulators, and even some of the Big Six accounting firms. Even FASB wasn't unanimous in its decision. The FASB board couldn't muster the required super-majority in its first vote, and took a second several weeks later. Even then, two of the seven board members dissented.

Banker/staff effort. Seeing the pickup in accounting-related issues more than five years ago, ABA's board asked that a CPA be brought aboard to track accounting issues for the banking industry. That was Donna Fisher, who is now ABA's manager of accounting policy. …

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