Banks Win Battle Against Fair Valueon January 25th, 2011 at 11:41 pm
Banks have long opposed valuing their loans at market value, preferring instead to carry them at amortized value. In other words, if the value of a loan falls, the bank can pretend that it hasn’t and hope that investors will be fooled. The Financial Standards Accounting Board proposed to require banks to carry their loans at market value, but FASB wilted under industry pressure and reversed its position. For the intrepid analyst (or law student?), however, a bank’s true financial condition can be determined by digging into the footnotes.