U.S. financial services firms and business groups want even more guidance and leeway from accounting rulemakers on a controversial mark-to-market accounting standard blamed for billions of dollars in bank writedowns, the groups said on Tuesday.

Under threat from Congress, the Financial Accounting Standards Board (FASB) issued two proposals giving financial services firms more flexibility to account for toxic assets.

FASB members are due to meet April 2 to discuss the proposals. If the board approves the proposals, the guidance would be effective for interim and annual periods ending after March 15.

Although groups such as the U.S. Chamber of Commerce and the American Council of Life Insurers voiced support for FASB's actions, they said more work needs to be done.

The business groups said there is still concern over what constitutes an inactive market and a more explicit definition of 'materiality' among other things.

Under the mark-to-market accounting rule, assets are valued based on a price in an active market. If there is no demand for an asset, or the market is inactive -- which is the case for many mortgage-backed securities -- management relies on their best estimate based on computer models.

Fearing auditors and unsure of how to apply the rule, financial firms have said they have been forced to mark down assets to artificially low prices to reflect current market prices when the value of the asset may be worth much more in the future.

Under FASB's proposals, released days after lawmakers threatened to pass legislation to relax the accounting rule, financial firms would be allowed to exercise more judgment in determining if a market for an asset is inactive and if a transaction is distressed.

If a market is found to be distressed, companies do not have to use recent depressed prices to value the assets on their books.

The business groups want to be able to rely on the proposed guidance when working on their first quarter reports and want guidance on whether prior losses can be recouped.

The groups, which include the Real Estate Roundtable and the Mortgage Bankers Association, also want the accounting watchdog, the Public Company Accounting Oversight Board, to be aligned with FASB's proposals so that banks are not penalized for using the accounting rulemaker's guidance.

A PCAOB spokeswoman said the board has been following the developments in the economy and evaluating whether they warrant any changes to the auditing standards.

If future guidance is needed, we will not hesitate to act, the spokeswoman said.

(Reporting by Rachelle Younglai; Editing by Tim Dobbyn)