Joe Price, Bank of America Corp's cfo, defended "fair value accounting" methods before a Federal Reserve Bank of Chicago conference, stating that it produces “more transparent" risk, Reuters reports.
Fair value is a way of accounting for assets and liabilities based on how much they are worth now as opposed to using historical values. Critics have blamed it for exacerbating the credit crisis by forcing companies to use complex methods to value assets where there is little trading to identify market prices.
In March, the U.S. Securities and Exchange Commission asked about 30 companies to consider disclosing more information on how they value their hardest-to-price assets.
Price defended the concept of "principle-based" accounting, in which companies are given more leeway to follow broad accounting guidelines,
rather than the specific rules that have traditionally been followed in the U.S.
The six leading global accounting firms have pushed for worldwide adoption of International Financial Reporting Standards, which are seen as principle-based, a trend Price called positive. But Price suggested that it would be difficult to move toward IFRS without reforms that would prevent securities and class-action lawyers from suing over specific rule violations.
