It’s time to re-start your financial accounting radar because a new attack is looming just over the horizon.
The good folks at the Financial Accounting Standards Board are considering changes to the mark to market rules. If approved, this could radically change how values are calculated for balance sheets.
It wouldn’t be FASB’s first move. In April they allowed banks to get mushy with how they show the value of their loans. I guess they thought there was little need to show true value especially after the recession has nuked the collateral. After all, why would a bank’s management really want all that nasty pressure to write down or write off loans? If the shareholders or regulators don’t know the values then it really doesn’t matter. Or does it?
Now FASB is proposing to expand this fuzziness to anyone who has assets. Especially if those assets are worth a lot less than a few years ago. If approved it would take the balance sheet bingo into the mainstream of corporate America. Both big and small. The result would be stronger balance sheets for many companies. But there would probably be fewer believers of those balance sheets.
The following links show a full text of the proposed changes (http://www.fasb.org/cs/ContentServer?c=Document_C&pagename=FASB%2FDocument_C%2FDocumentPage&cid=1176156436374) and a news release explaining the rationale behind issuing the exposure draft (http://www.fasb.org/cs/ContentServer?c=FASBContent_C&pagename=FASB%2FFASBContent_C%2FNewsPage&cid=1176156434356).
Here is a story on the change for the banks: http://www.cnbc.com/id/30009862
Howard Schulman
Transworld Business Brokers, LLC
Business Sales, Mergers, Acquisitions & Financings
754 224 3137 — Direct Line
954 449 7899 — Fax
howard@tworld.com