April 2, 2009 / 10:03 PM / in 9 years

Little impact from FASB fair value change: analyst

NEW YORK (Reuters) - Changes to U.S. fair value accounting rules may not be a very big deal at all, an analyst said.

The Financial Accounting Standards Board voted on Thursday to allow banks to record certain securities on their balance sheets at their market value, but not necessarily their value in a fire sale. In other words, if one bank has sold assets at bargain basement prices to get them off its balance sheets, its competitors do not have to mark similar assets down to those low levels.

But banks must still account for current market prices and cannot mark assets at values they might fetch in different market conditions, said Jennifer Thompson, senior analyst at independent research firm Portales Partners.

“There’s no material change to FASB’s original statement here. There is a clarification, but it’s a more subtle change than people think,” Thompson said.

In some cases, auditors may believe they have more flexibility to determine fair value for trading assets, but that is not likely to translate to banks recording big gains for the first quarter, Thompson said.

Banks can elect to use these new rules for their first quarter, which most U.S. financial companies will report later this month.

Financial markets initially cheered the move, but then the euphoria faded somewhat. The Standard & Poor’s 500 rose more than 4 percent after the ruling and then gave back some gains, ending 2.9 percent higher.

“It’s a positive, but not to the extent where bank earnings will be much higher than they would have been,” Thompson added.

Reporting by Dan Wilchins; Editing by Andre Grenon

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