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News Releases
April 09, 2009
New accounting rule for market values may confuse bankersBY JERRY SIEBENMARK
The Wichita Eagle
The banking industry's largest trade group supports it, but some Wichita bankers are confused by it.
It is a rule change to mark-to-market accounting made last week by the Financial Accounting Standards Board.
The rule change will "provide much needed clarification in estimating market values in illiquid markets," the American Bankers Association said in a statement applauding the rule change.
In other words, it's expected to provide bankers some guidance in determining the value of an asset, such as a mortgage-backed security for which there is no market because of the recession and the upheaval in the financial industry.
But banks that haven't invested in such exotic securities are trying to figure out what exactly it means for them.
"For Equity Bank, it will have an impact," said CEO Brad Elliott. "At this time we do not know what those changes are going to be, how it will change our numbers."
Elliott said he thinks the effect will be minimal and won't be greatly beneficial or too negative to his bank's financial statements.
"We have not ever purchased things that take big swings," he said.
He thinks his bank will have to more frequently assess the fair-market value of assets that it has purchased, such as loans or deposits -- which it previously didn't have to do.
Accountants who work with banks said they, too, are working to understand how the change affects their clients.
"I think a lot of folks, bankers and accountants alike, are still sorting through it and (trying to determine) what does it really mean," said Christina Ricke, member-in-charge of accounting firm Kennedy and Coe's financial institutions group.
If anything, Ricke said, the rule change gives bankers, accountants and auditors a "little more wiggle room" in determining the fair value of distressed assets.
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