Mark-to-Market Accounting: Practices and Implications

March 12, 2009, 10:00 a.m., 2128 Rayburn House Office Building
Capital Markets

 Kanjorski Convenes Hearing to Address Problems Facing Mark-to-Market Accounting

Washington, DC – Congressman Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, today announced that the Subcommittee will hold a hearing to examine the mark-to-market accounting rules that many contend have exacerbated the current troubles in the financial industry and in the broader economy. The standard requires companies to value assets they hold at current market values. For assets that are frozen and have a diminished current market value but may recover value in the future, the standard has proven problematic. Companies are then forced to write-down billions in assets, which can lead to further write-downs elsewhere.

“Illiquid markets have resulted in great difficulty in valuing sizable assets.  Some have therefore complained about fair value accounting and sought to eliminate it.  While companies need stability, investors still need accurate information.  We therefore cannot allow for fantasy accounting that wishes away bad assets by merely concealing them,” said Chairman Kanjorski.  “As a result, we will seek at this hearing to engage in a constructive, thoughtful conversation with a diverse range of viewpoints aimed at identifying fair-minded, incremental, and achievable fixes to this problem.  In short, I want to find a way – within the existing independent standard-setting structure – to still provide investors with the information needed to make effective decisions without continuing to impose undue burdens on financial institutions.  Each of our anticipated witnesses will have the opportunity to contribute as we all pursue consensus solutions together to this thorny, contentious issue.”