Securities and Exchange Commission Acting Chief Accountant James Kroeker gave testimony before the House Committee on Financial Services Wednesday, where he discussed exploring the balance between increasing credit availability and prudent lending standards.
Kroeker had previously given testimony on March 12, where he encouraged improving, not suspending mark-to-market accounting.
The staff is working closely with the FASB and others to adopt the recommendations included in our study on mark-to-market accounting, Kroeker said in his March 12 testimony.
The SEC has examined mark-to-market accounting in the past, and although it has recommended changes to existing fair value accounting standards, it has not supported an outright suspension of the practice.
A report issued on December 30th, 2008, following a series of round table discussions on the issue, recommended improving existing fair value accounting standards and related guidance, Kroeker said
Kroeker, in his testimony Wednesday, said the SEC was pleased that the FASB has acted diligently and responsively to use their expertise as an independent standard-setter and expose amendments to the measurement of securities in inactive markets and the recognition of other-than-temporary security impairments.
Consistent with the sentiments we have clearly heard from many members of this Committee, I believe swift action must be taken to address the accounting for investment impairments and to improve the measurement guidance for illiquid assets for first quarter 2009 reporting, Kroeker stated.
I am also hopeful, Kroeker added, that the FASB will continue its efforts to comprehensively reconsider the accounting for all financial instruments, which was also a recommendation in the staff's mark-to-market study.
The primary objective of financial reporting, Kroeker said, is, and should be, to provide information useful to investors and creditors in their decision-making processes. The primary objective of prudential banking oversight has been to foster safety and soundness and financial stability.
The full Commission and I believe that confidence in our markets begins with the quality and transparency of the financial information available to help investors decide whether, when, and where to invest their hard-earned dollars.
He further argued, While financial reporting may serve as a starting point for other users, such as banking regulators, it should continue to be developed by the FASB to primarily satisfy the needs of private sector investors and other users that may not have the ability to otherwise obtain information in a format specific for their own use.
A primary goal of the federal securities laws is to promote honest and efficient markets and informed investment decisions through full and fair disclosure, Kroeker said in closing his remarks.
We support the FASB's swift and responsive actions to propose amendments that seek to address the recommendations included in the SEC staff's study. We will continue to solicit input from all parties affected by this issue.
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