The SEC´s Interpretive Release On "Mark-to-Market" Accounting

On September 30, 2008 the Office of the Chief Accountant of the U.S. Securities and Exchange Commission and the Financial Accounting Standards Board (the "FASB") jointly released an interpretive memorandum regarding "mark-to-market" accounting. The interpretation comes in the wake of concerns that excessive accounting write-downs have brought many financial institutions close to insolvency. Under the interpretation, sales of securities that are made in "disorderly transactions" are not determinative of the value of similar securities. Thus, where forced or distressed sales of mortgage securities have taken place in the market, other institutions are not necessarily required to mark the securities in their own portfolios to the fire sale price. Instead they may rely on other information, such as management's internal assumptions as to expected cash flows and risk, to determine the value of the mortgage securities in their own portfolios.