Financial Crisis Task Force Will Take Up Fair Value, Off-Balance-Sheet Transactions

The Financial Crisis Advisory Group, a joint task force assembled by FASB and the International Accounting Standards Board (IASB) to respond to the economic crisis, will take up issues including aspects of fair value accounting and off-balance-sheet transactions at its upcoming meeting.

The group, which meets March 5 at Baruch College in New York, will continue fair value discussions begun at earlier meetings. The talks are expected to center around whether it is appropriate and helpful for financial statement users for companies to report gains or losses from fair value changes in a reporting entity’s own indebtedness. Also on the table is what additional guidance, if any, is needed in the area of determining fair value.

FASB separately announced last week that its board had added new projects related to application guidance used to determine fair values and disclosure of fair value estimates. The projects were added in response to recommendations in an SEC study on mark-to-market accounting, as well as input provided by FASB’s Valuation Resource Group. FASB is working to complete projects on application guidance by the end of the second quarter of 2009 and the project on improving disclosures in time for year-end financial reporting. For project updates, go to www.fasb.org/project.

For off-balance-sheet transactions, the Financial Crisis Advisory Group will explore the best ways to bring out useful information regarding securitizations and other structured entities, as well as what principles should determine whether a securitization or other structured entity is included in the balance sheet of a sponsoring entity, assuming that a consolidation/de-recognition approach is used.

The group is also slated to discuss an issue that gained more attention as accounting standards have come under scrutiny in the financial crisis—standard-setter governance and due process. Questions on the agenda for the meeting include who should have oversight, and to what extent, over accounting standard setters nationally or internationally to ensure appropriate independence, accountability and transparency in the standard-setting process.

Led jointly by co-chairs from Europe and North America, the advisory group was created to advise FASB and the IASB about standard-setting implications of the global financial crisis and potential changes to the global regulatory environment. It held its first meeting in January and is expected to conclude its work within six months.