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FASB Giving Lenders a Break on Impairment.
Byline: Brian Collins
Washington-The Financial Accounting Standards Board approved changes to its impairment guidance last week that should reduce the amount of charges banks and other holders of mortgage-backed securities have to report for the fourth quarter.
The accounting body has been under pressure from financial institutions, trade groups, and even some elected officials to adjust its "other-than-temporary impairment" (OTTI) guidance.
This pressure led FASB to issue the proposed changes to its OTTI guidance on Dec. 19 and finalize it at a board meeting last Wednesday by a 3-2 vote.
The new guidance allows management to make a "reasonable judgment" of future cash flows of debt securities in determining impairment. Previous guidance required consideration of what "market participants" would use in determining the current fair value of MBS.
At Wednesday's meeting, the board amended the proposed guidance to stress that MBS holders are required to assess collections of future cash flows even when the securities are performing and borrowers are making timely payments.
In making that assessment, MBS investors must consider all available information reflecting past events and current conditions in ...
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Source: HighBeam Research, FASB Giving Lenders a Break on Impairment.