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FASB Formally Closes Door on Mark to Market Standard

Posted on 1/6/2016

In a huge win for the industry, the Financial Accounting Standards Board yesterday issued its final "Recognition and Measurement" accounting standard with few changes made to bank accounting. The new standard comes five and a half years after the initial proposal required marking all financial assets and liabilities to market on the balance sheet.

Under the new standard, only changes in the fair value of equity investments will be required to be recorded through. The income standard will also eliminate instances in which gains are recorded merely because a company's credit rating was downgraded. Banks that do not qualify as "public business entities" may also eliminate their current disclosures of fair value, through PBEs must comply with a more stringent disclosure requirement.

The standard will take effect in 2018, though early adoption will be allowed. ABA is aware of various banks that hold significant equity investment and is already in the process of talking with bank regulators on the possibility of excluding market value changes from regulatory capital. These talks are expected to continue throughout the transition period.

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