Skip to main content

FASB Rule 157 still has teeth

In a recent post I wrote how Goldman Sachs and others could be facing deeper write-downs as the result of FASB Rule 157.

There has been news that the rule has been deferred for one year. In actuality, the FASB has only chosen a partial deferral. The rule takes effect today as scheduled for financial assets and liabilities of financial institutions. Accounting in compliance with the rule will be deferred for one year for non-financial assets and liabilities.

The FASB statement is brief and the full text of the announcement is below:

"NEWS RELEASE 11/14/07
FASB Rejects Deferral of Statement 157 for Financial Assets and Liabilities

Partial Deferral Granted for Nonfinancial Assets and Nonfinancial Liabilities

Norwalk, CT, November 14, 2007-At its Board meeting today, the Financial Accounting Standards Board (FASB) reaffirmed its vote against a blanket deferral of Statement 157, Fair Value Measurements. For fiscal years beginning after November 15, 2007, companies will be required to implement the standard for financial assets and liabilities, as well as for any other assets and liabilities that are carried at fair value on a recurring basis in financial statements. As a result, Statement 157
becomes effective as originally scheduled in accounting for the financial assets and liabilities of financial institutions.

The Board did, however, provide a one year deferral for the implementation of Statement 157 for other nonfinancial assets and liabilities. An exposure draft will be issued for comment in the near future on this partial deferral. The audiocast of the November 14th meeting is currently available at www.fasb.org. More information about topics discussed and decisions reached at the meeting will also be posted on the FASB website in the coming days."

Unless SIVs, CDOs and MBSs are somehow considered "non-financial" it still looks like many financial stocks will get hit with the full force of reality in pricing their illiquid Level 3 assets. This could get very ugly.

Barry Ritholz has written a good post on this subject. You can read it here.

Disclosure: author owns no stocks mentioned on this article

Comments

Anonymous said…
Hello, I have a new blog, and would be interested in exchanging links.
I am Spanish and my blog covers the analysis of many equity markets.
I think it could be beneficial for both.

Greetings
contact us: broadmarket@gmail.com

http://www.broadmarket.blogspot.com/

Popular posts from this blog

Time to be conservative with your 401K

Most of the posts I and other financial bloggers write are typically focused on individual stocks or ETFs and managing active portfolios. For those folks who are more conservative investors, those whose main investment vehicle is a 401K, for example, the techniques for portfolio management might be a little different. The news of stock markets falling and pundits predicting recession is disconcerting to professional investors as well as to those of us who are watching our balances in an IRA or 401K sag. What approach should the average 401K investor take? Let's assume that the investor is contributing on a regular basis to one of these retirement accounts. There are two questions that the investor needs to ask: 1. Should I stop putting the regular contribution into stocks? My feeling is that investors making regular contributions are being handed a present by the markets. Every week the market goes down, these investors are lowering their average cost. When markets reco...

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas. Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing what...

Trade Radar gets another update

Some of our data sources changed again and it impacted our ability to load fundamental/financial data. In response, we are rolling out a new version of the software: 7.1.24 The data sourcing issues are fixed and some dead links in the Chart menu were removed. So whether you are a registered user or someone engaged in the free trial, head over to our update page and download the latest version. The update page is here:   https://tradingstockalerts.com/software/downloadpatch Contact us if you have questions or identify any new issues.