The Group of 20 nations should resist pressure to relax an asset-valuation rule blamed for worsening the global credit crisis, the Financial Accounting Foundation said in a letter to President George W. Bush.
``We are very concerned about recent efforts in the United States and abroad that contemplate political solutions to perceived flaws in certain accounting standards,'' Chairman Robert Denham wrote in a letter yesterday before a G-20 summit in Washington. Legislation would ``dangerously compromise the credibility of financial reporting,'' said Denham, whose foundation oversees the Financial Accounting Standards Board.
The so-called fair-value accounting rule forces firms to mark down holdings to current trading prices quarterly, which companies including American International Group Inc. (AIG:US) say makes no sense when markets seize up. Proponents, including Norwalk, Connecticut-based FASB, say fair-value adds to transparency and gives investors information about publicly traded companies.
The non-government International Accounting Standards Board, under pressure from European banks and elected officials, altered its fair-value provision Oct. 13. The change lets lenders reclassify some of the investments to avoid the requirement.
The IASB, which writes rules used in more than 100 countries, ``departed from its normal due process'' to make the revision, Denham said. The G-20, which is meeting for two-day summit starting today, should ``support independent standard- setting via a robust due process free from political interference.'' The G-20 leaders will consider common standards for accounting, Bush said in a New York speech yesterday.
The U.S. Securities and Exchange Commission, which can override FASB, should reject calls to suspend fair-value, Denham said in an Oct. 28 letter to Chairman Christopher Cox. FASB should be free from outside pressure and should consider changes to the rule in an ``independent and deliberative manner,'' Cox said the next day at public discussion on fair-value.
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