Fair value controversy enters bailout picture

The recently passed $700 billion bailout bill included language that reaffirmed that the SEC has the authority under the Securities Exchange Act of 1934 to suspend Financial Accounting Standard 157, "if the SEC determines it is necessary or appropriate in the public interest and is consistent with the protection of investors," notes Financial Week.

So the controversy continues. Some think the language portends an actual move by the SEC to get rid of the requirement, leading critics to charge that the agency would effectively roll back years of advances and cover a lot of bad decisions. But the real issue for the SEC would be proposing an alternative. Do you get rid of the rule entirely, or somehow suspend the use of actual prices? It's unclear if any of this would make a huge difference in terms of specific security valuations. My guess is that the SEC intends to stick with the rule, and emphasize the latitude that issuers have, hence the recent clarification that came down. The new law also required the SEC to study the issue and report within 90 days. Stay tuned.   

For more: 
- here's the Financial Week article 

Related Article:
What to do with fair value accounting