Mark to market accounting standards : a study by the SEC / Brian N. Brinker, editor.

Format:

Book

Contributor:

Brinker, Brian N.

Series:

Business economics in a rapidly-changing world series.

Business economics in a rapidly-changing world series

Language:

English

Subjects (All):

Fair value--Accounting--Standards.

Fair value.

Physical Description:

1 online resource (265 p.)

Edition:

1st ed.

Place of Publication:

New York : Nova Science Publishers, c2009.

Language Note:

English

Summary:

This book focuses on the events leading up to the Congressional call for a study illustrating the need for identifying and understanding the linkages that exist between fair value accounting standards and the usefulness of information provided by financial institutions.

Contents:

Intro

MARK TO MARKET ACCOUNTING STANDARDS: A STUDY BY THE SEC

CONTENTS

PREFACE*

COMMONLY-USED ABBREVIATIONS

EXECUTIVE SUMMARY

A. THE ORGANIZATION OF THIS STUDY

1. Effects of Fair Value Accounting Standards on Financial Institutions' Balance Sheets

2. Impact of Fair Value Accounting on Bank Failures in 2008

3. Impact of Fair Value Accounting on the Quality of Financial Information Available to Investors

4. Process Used by the FASB in Developing Accounting Standards

5. Alternatives to Fair Value Accounting Standards

6. Advisability and Feasibility of Modifications to Fair Value

Accounting Standards

B. RECOMMENDATIONS

INTRODUCTION

A. HOW THIS STUDY FULFILLS THE STATUTORY MANDATE

1. Statutory Mandate

2. Context for this Study

3. Approach to this Study

4. Structure of This Study

B. THE FINANCIAL REPORTING FRAMEWORK[21]

1. Balance Sheet

2. Income Statement

3. Other Basic Financial Statements

4. .Notes to the Financial Statements, Management's Discussion and Analysis of Financial Condition and Results of Operations, and other Disclosures

C. OTHER CONSIDERATIONS

1. Role of Accounting in Prudential Oversight

2. International Considerations

D. BACKGROUND INFORMATION ON FAIR VALUE ACCOUNTING

1. Definition of Fair Value

2. Application of Fair Value Accounting

a. How Fair Value Impacts Accounting for Financial Instrument

Equity Securities

Debt Securities

Securitized Assets

Direct Investments in Loans

Derivative Assets and Liabilities

Other Financial Liabilities

Fair Value Option

Impairments

B. How Fair Value Impacts Accounting for Non-Financial Instruments

Business Combinations

Goodwill

Indefinite-Lived Intangible Assets

Other Long-Lived Assets

3. Historical Context for Fair Value Accounting.

Early-Twentieth Century through the Great Depression

Valuation of Securities

Banking and Savings and Loan Crisis

Changes in the Banking Model During the 1980s

FASB's Financial Instruments Project

Expanded Use of Derivative Instruments in the 1990s

4. Other Measurement Bases

a. Description of other Measurement Bases

Historical Cost

Current Cost

Net Realizable Value

Present Value of Future Cash Flows

b. Consideration of Measurement Attributes

EFFECTS OF FAIR VALUE ACCOUNTING STANDARDS ON FINANCIAL INSTITUTIONS' BALANCE SHEETS

A. METHODOLOGY FOR STUDYING EFFECTS OF FAIR VALUE ACCOUNTING STANDARDS

B. EMPIRICAL FINDINGS FROM THIS STUDY ON EFFECTS OF FAIR VALUE ACCOUNTING STANDARDS

1.Assets

a. Significance of Assets Measured at Fair Value

i. Percentage of Assets Measured at Fair Value

Banking

Broker-Dealers

Credit Institutions

GSEs

Insurance

Analysis by Issuer Size

ii. Percentage of Assets Measured at Fair Value Through Income

Overall Analysis

Analysis by Issuer Industry

iii. Distribution of Issuers by Percentage of Assets Measured at Fair Value

iv.Use of Fair Value Option

Analysis on Overall Basis

v. Comparison of Percentage of Assets Measured at Fair Value Before and After Adoption of SFAS No. 157 and SFAS No. 159

b. Nature of Assets Measured at Fair Value on a Recurring Basis

Investments

Trading Accounts

Separate Accounts

Derivatives.

c. Classification of Assets in Fair Value Hierarchy

I. Fair Value Hierarchy Classification Over Time

2. Liabilities

a. Significance of Liabilities Measured at Fair Value

i. Percentage of Liabilities Measured at Fair Value

ii. Distribution of Issuers by Percentage of Liabilities Measured at Fair Value

Analysis by Industry

iii. Use of Fair Value Option

Banks

iv. Comparison of Percentage of Liabilities Measured at Fair Value Before and after Adoption of SFAS No. 157 and SFAS No. 159

b. Nature of Liabilities Measured at Fair Value on a Recurring Basis

Derivatives and Trading Account Liabilities

Repurchase Agreements

c. Classification of Liabilities in Fair Value Hierarchy

i. Fair Value Hierarchy Classification over Time

ii. Distribution of Issuers by Percentage of Liabilities Classified as Level 3

3. Equity

a. SFAS No. 157 Adoption

b. SFAS No. 159 Adoption

Broker-Dealers.

GSEs

c. Accumulated other Comprehensive Income

AFS Securities

Derivatives Designated in Cash Flow Hedging Relationships

4. Income Statement

a.Recurring Fair Value Measurements

i.Recurring Mark-to-Market Adjustments

ii. Level 3 Fair Value Measurements

iii. Impact of Changes in Creditworthiness in Measuring Liabilities

b. Non-Recurring Fair Value Measurements (Impairments)

i. All Impairments

ii. Other-than-Temporary Impairments on Securities

iii. Goodwill Impairment

c. Key Income Statement Drivers Unrelated to Fair Value Measurements

d Conclusions

IMPACT OF FAIR VALUE ACCOUNTING ON BANK FAILURES IN 2008

A. METHODOLOGY FOR STUDYING BANK FAILURES

B. REGULATORY FRAMEWORK GOVERNING BANK FAILURES

1. Capital Adequacy Guidelines

2. Reported Capital Status For 2008 Failed Banks

C. HOW FAIR VALUE ACCOUNTING AFFECTS REPORTING UNDER U.S. GAAP FOR BANKS

1. Aggregate Failed Banks &lt

1 Billion of Total Assets[152]

2. Aggregate Failed Banks &gt

1 Billion, but &lt

10 Billion of Total Assets [158]

3. Failed Banks &gt

10 Billion of Total Assets

a. Washington Mutual

b. IndyMac

c. Downey Savings and Loan

D. INTERACTION BETWEEN REGULATORY CAPITAL AND U.S. GAAP

E. ANALYSIS OF CAUSES OF DECLINES IN FAILED BANK CAPITAL

1 Billion of Total Assets

2.. Aggregate Failed Banks &gt

F. EVALUATION OF THE CIRCUMSTANCES SURROUNDING EACH BANK FAILURE

1. Failed Banks &lt

2. Failed Banks &gt

3. Failed Banks &gt.

10 Billion of Total Assets

c.Downey Savings and Loan

G. Impact of Fair Value Accounting on other Distressed Financial Institutions

IMPACT OF FAIR VALUE ACCOUNTING ON THE QUALITY OF FINANCIAL INFORMATION AVAILABLE TO INVESTORS

A. INVESTOR AND USER VIEWS ABOUT THE USE OF FAIR VALUE MEASUREMENTS

1. Comment Letters and other Public Statements

. a. Representative Survey of Comment Letters

Investors Technical Advisory Committee ("ITAC") -

CFA Institute -

Investment Company Institute -

International Corporate Governance Network -

Jeffery B. Cross, retired securities analyst -

David Hodge, Glimbal Capital Management -

Dan Nguyen, CFA, MBA -

Credit Suisse Group -

b. Other Public Statements

Dane Mott and Sarah Deans, J.P. Morgan Securities Inc. -

Dennis Jullens, UB S Investment Research -

Bill Mann, The Motley Fool -

Bridget Gandy, Dina Maher, and Olu Sonola, Fitch Ratings -

Neri Buckspan, Ron Joas, and Sue Harding, Standard &amp

Poor's article -

Mark LaMonte, Wallace Enman, Wesley Smythe, Donald Robertson, and Jason Cuomo, Moody's Global Credit Research -

c. Observations

2. Common Themes in Individual Analyst Reports on Fair Value Measurements

B. VIEWS PRESENTED BY PARTICIPANTS AT RECENT SEC FAIR VALUE ROUNDTABLES

1. July 9 Roundtable[218]

a. Usefulness of Fair Value and Related Disclosures in CurrentMarket Conditions

b. Application of Fair Value Accounting

c.. Market Behavior Effects of Fair Value Accounting

d. Impact of Non-Performance Risk on Fair Value of Liabilities

2. October 29 Roundtable[219]

a. Usefulness of Fair Value Accounting

b. Market Behavior Effects of Fair Value Accounting

c. Application of Fair Value Accounting

d. Interaction with Regulatory Capital Requirements.

e. Potential Changes to Financial Statement Presentation.

Notes:

Description based upon print version of record.

Includes bibliographical references (p. 204-231) and index.

Description based on print version record.

ISBN:

1-61728-535-8

OCLC:

662459121