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Mark-to-market plan could be modified: FASB member

NEW YORK (Reuters) - Strong opposition to a controversial proposal to expand fair value accounting could sway rulemakers to modify the plan, a member of the U.S. accounting rule-making board said on Tuesday.

The proposal by the Financial Accounting Standards Board calls for loans and other financial assets to be valued based on what they would fetch in the market, known as mark-to-market, or fair value. That change is intended to give investors a clearer picture of assets held on banks’ books.

The banking industry has opposed the measure, saying it does not make sense to assign market prices to loans that will never be sold.

“Thus far, I think the count is up to about 1,500 or so comment letters,” said Lawrence Smith, a board member of FASB, which sets U.S. accounting rules. “I think I’ve read one that supports what we propose.”

Smith added that board members will probably be influenced by the opposition. “If I were a betting person, I would bet on some type of hybrid model being adopted,” he said.

The proposal differs from an approach taken by the International Accounting Standards Board, which has said loans should be valued based on amortized costs.

FASB has been working with IASB to reach agreement on one set of global standards. Mark-to-market is a key area where the rule-makers remain far apart.

Based in London, IASB sets rules that are used in more than 110 countries.

FASB is taking written comments on its proposal until September 30 and will hold public round tables until mid-October.

It will meet with IASB in November, Smith said.

“We’re hopeful we can still come to a converged solution, although the time frame is very tight,” he said.

FASB and IASB are trying to achieve a convergence of their accounting rules by June 2011, a timeline being pushed by leaders of the G-20 group of nations.

The U.S. Securities and Exchange Commission is also pushing for FASB and IASB to finish, so it can decide by 2011 whether to move U.S. companies to the international standards.

Reporting by Dena Aubin; Editing by Steve Orlofsky

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