WASHINGTON (Reuters) - Institutional investors and the accounting industry on Wednesday lashed out against potential plans to suspend rules used to account for banks' hard-to-price assets, saying it would deprive investors of critical information.
"Investors have a right to know the current value of an investment, even if the investment is falling short of past or future expectations," said the Council of Institutional Investors, whose members hold assets of about $3 trillion.
The council, the CFA Institute and accounting group the Center for Audit Quality, are urgently trying to convince members of Congress not to suspend the fair value accounting rule as part of a $700 billion financial bailout package.
Fair value, also called mark-to-market or FAS 157, requires financial firms to value assets based on what they could fetch in a market transaction.
However, some lawmakers and financial services firms have partially blamed the rule for forcing U.S. banks to take big write-downs on the value of assets affected by the credit crunch.
Representatives from both parties are trying to persuade the lead negotiators on the massive financial bailout package to include a measure requiring securities regulators to suspend fair value accounting, one industry source said.
House Republican leader John Boehner of Ohio called the accounting rules onerous for certain financial assets and said changing them has been a priority for House Republicans throughout the process of crafting an economic rescue package.
Investor groups and the auditing profession said the proposed suspension is unnecessary and counterproductive.
"Fair value accounting is only a means of communicating information that is important to investors and other market stakeholders, it is not the underlying cause of the current economic crisis," the groups said.
Separately, PricewaterhouseCoopers, one of the Big Four accounting firms, sent a letter to all members of Congress saying a suspension would roll back decades of advances in transparency in accounting and reporting.
Language reaffirming the SEC's authority to suspend the accounting rule was included in the previous bill, which failed and sent markets sharply lower.
On Tuesday, the SEC clarified its accounting rules and said that management's internal assumptions can be used to measure fair value when relevant market evidence does not exist.
(Reporting by Rachelle Younglai; Editing by Bernard Orr)
