Challenges in Asset Valuation Fuel Industry Debates.(Special Report)

Byline: Amilda Dymi

New York-A newly enhanced focus on reporting and processing financial information to ensure transparency that allows data users to get more accurate asset valuations is fueling debates on the best ways to achieve that goal.

In a letter to Russell G. Golden, technical director of the Financial Accounting Standards Board, a Washington-based nonprofit created to serve investors, public company auditors and capital markets, the Center for Audit Quality expressed its support for FASB efforts to improve illiquid asset valuations through a set of proposals.

FASB has proposed "Recognition and Presentation of Other-Than-Temporary Impairments" and "Determining Whether a Market is Not Active and a Transaction is Not Distressed" or FSP FAS 115-a and FAS 157-e.

Both CAQ and FASB support industry efforts to respond to one of the most significant consequences of the current economic crisis: difficulties when estimating the fair value of illiquid assets, including mortgage-backed securities.

In the letter - sent to the secretary of the Treasury, the chairmen of the Federal Reserve and Securities and Exchange Commission, among others - CAQ stresses how critical it is that improvements to financial reporting "address the issues at hand by enhancing the relevance and transparency of financial information that is critical to properly functioning capital markets."

CAQ supports an "appropriately modified" FSP FAS 115-a noting that it will achieve the objectives of providing preparers appropriate relief from the impact of fair value measurements in the current market environment" without significantly damaging the transparency that investors and other users of financial statements seek.