Market Value Accounting:

Responses to Financial Accounting Standards Board Exposure Draft

AFMD-92-23: Published: Jan 31, 1992. Publicly Released: Feb 10, 1992.

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Pursuant to a congressional request, GAO: (1) identified significant issues related to financial institutions raised in response to the Financial Accounting Standards Board's December 1990 exposure draft of a proposed Statement of Financial Accounting Standards; and (2) provided information on the respondents' views on the issues identified.

GAO noted that the proposed statement extended existing market value disclosure practices by requiring all entities to disclose the market value of most financial instruments for which it was practicable to estimate market value. GAO found that the four major issues raised in response to the exposure draft included the: (1) relevancy of market value disclosures; (2) subjectivity and comparability of market value information; (3) measurement and disclosure of the value of core deposits; and (4) potential costs of market value disclosures. GAO also found that: (1) bankers generally opposed the implementation of the proposed market value disclosures, asserting that such disclosures were inappropriate for financial institutions, since banks acquire assets and liabilities for long-term purposes; (2) bankers also asserted that market value information would be unreliable and of little use to financial statement users, since it would not be comparable from period to period or among financial institutions; (3) large public accounting firms, academicians, and regulatory and other governmental agencies generally supported the proposed statement and believed that market value disclosures would help financial statement users assess an entity's financial condition, but stated that ensuring that the disclosures' reliability and providing them at a reasonable cost would be difficult; and (4) most nonfinancial corporations opposed the statement, but some suggested that it might be useful for financial institutions.