On October 29, 2008, the SEC held the first of two roundtables on "mark-to-market," or "fair value," accounting for financial institutions. The roundtables are intended to provide input to the SEC as part of a Congressionally-mandated study pursuant to the Emergency Economic Stabilization Act of 2008.

The discussion focused primarily on the mark-to-market standards as applicable to financial institutions under FASB Statement No. 157, which is effective for financial statements for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. For this purpose, FASB 157 defines "fair value" as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date."

The roundtable panelists, drawn from the insurance, banking, accounting and pension industries, as well as labor and education representatives, generally expressed concerns with the scope, complexity and perceived difficulty of complying with the new mark-tomarket requirements. They had particular concerns in this regard about the costs of compliance for smaller reporting institutions.

Representatives of the Federal Reserve Board, Treasury Department, FASB, IASB and PCAOB participated as "observers," together with SEC staff members. These observers asked questions and otherwise facilitated the discussion, but generally did not express views of their own.

Some of the panelists clearly supported fair value accounting called for by FASB 157, citing the need to increase transparency, so long as it fit the reporting company's business model. Other panelists urged the SEC to take a "less rigid" view, with some suggesting that footnote disclosure of the results of marking-to-market would be preferable to having to give effect to the resulting fair values on the face of the financial statements.

Much of the criticism of mark-to-market accounting was grounded on a perceived relative arbitrariness of assumptions required to be made under this accounting method. For example, it could be said that FASB 157, in effect, arbitrarily assumes that assets are disposed of as of the date of the financial statements, for valuation purposes. Thus, some panelists strongly urged that marking-to-market should not be required when there is no intention to sell an asset such as a debt instrument that is to be held to maturity. Some panelists also recommended that the SEC revisit FASB 157, which it has authority to repeal or modify, and adopt new, more reasonable rules on impairments, with greater guidance on compliance. Several commentators noted, however, that mark-to-market financial reporting was "not the cause of today's market situation."

To summarize, the panelists expressed a range of views. While few, if any of them, were entirely satisfied with the status quo under FASB 157, there was no consensus on what remedial steps should be taken. The next SEC-hosted roundtable on this subject will be held on November 21, 2008.