SEC accounting rule change draws fire

Oct. 1, 2008 at 2:00 PM

NEW YORK, Oct. 1 (UPI) -- The Securities and Exchange Commission's new, relaxed accounting rules could give U.S. businesses too much leeway in assessing their assets, critics said.

The rules announced Tuesday say firms do not have to use the lowest prices when assessing the value of their own securities. The accounting rules previously tied this process to the lowest prices, even if a struggling firm had to sell similar securities at less than full market values, USA Today reported Wednesday.

The new rule "is intended to provide increased clarity related to the practices that may be used to determine an appropriate fair value in the light of current market conditions," SEC deputy chief accountant Jim Kroeker said.

"These illiquid assets are a serious problem. No one knows what they are worth," Brian Wesbury at First Trust Advisors told the newspaper. "But they're worth more than the fire-sale prices."

But, the new accounting rule "is a very deceptive statement," said Donn Vickrey, co-founder of Gradient Analytics.

"It turns (the current practice) on its head and lets you do whatever you want to do again," Vickrey said.

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