UPDATE 1-US accounting body proposes impairment-rule change

(Adds background, details on impairments; byline)

By Emily Chasan

NEW YORK Dec 22 (Reuters) - The Financial Accounting Standards Board, which sets U.S. accounting rules, on Monday proposed a change it said would bring greater consistency to rules on reporting impairments for financial instruments.

The proposal is one of four short-term projects the board has been working on to improve disclosures around the way companies take writedowns for securities that have dropped in value due to the credit crisis.

The board also said it will begin a joint project with the London-based International Accounting Standards Board to more comprehensively "address the complexity in existing standards of accounting and reporting for financial instruments."

Under U.S. accounting rules, companies say an asset is impaired when there is a sudden decline in the value of that asset. Depending on the type of asset, those impairments can be written off.

This year, for example, banks have taken writedowns on billions of dollars worth of special investment vehicles, mortgage-backed and asset-backed securities.

The American Bankers Association earlier this year asked U.S. securities regulators to clarify the rules on impairments because it said the current rules were making it difficult for banks to value their assets.

FASB said the proposed change should lead to more consistent accounting judgments on whether other-than-temporary asset impairments have occurred. (Reporting by Emily Chasan; Editing by Gary Hill)