Brown Proposes Fair Value Amendment

Senators Sharrod Brown (D-OH) and Edward Kaufman (D-DE) have offered an amendment to the Restoring American Financial Stability Act of 2010 that would essentially require the Securities and Exchange Commission (SEC), the Financial Accounting Standards Board (FASB) or both to establish a rule that publicly traded companies list all assets and liabilities on the balance sheet and that these be recorded at fair value.
Historically accounting standards have allowed off balance sheet financing via leases and repurchase agreements. It was recently learned that Lehman Brothers used repurchase accounting to remove liabilities from the balance sheet in a maneuver to increase leverage.
The amendment, if adopted and passed, would also present an obstacle to the effort to merge FASB ad IASB standards. The FASB prefers fair value basis, however the International Accounting Standards Board (IASB) is opposed.
The American Institute of Certified Public Accounts, the Center for Audit Quality, the Chartered Financial Analyst Institute, the Council of Institutional Investors, the Investment Company Institute, the Financial Executives International, and the U.S. Chamber of Commerce have objected to the Brown amendment. Their stated position, in part, is:

We believe political influences that dictate one particular outcome for an accounting standard without the benefit of a public due process that considers the views of investors and other stakeholders would have adverse impacts on investor confidence and the quality of financial reporting, which are of critical importance to the successful operation of the U.S. capital markets.