Professor Elam

In Chapter 12 in Intermediate Accounting  we studied Investment Rules.  The Mark to market FASB rule passed a few days after the all time high in the Dow at 14,000 in 2007.  It has been down ever since. So, now that mortgages have morped into toxic assets, the FASB is being pressured to relent.  And so theFASB has voted to allow a change, click on the hyper link to read the article. 

Value is in the mind of the beholder. So is distress.  Will teh readers of financial statements suspend move their mental valuationmodels beyond this crisis to when these mortgages might hav value. Well they are today as the markets are up. But are the mortgages suddenly more valuable since we moved the goal posts so to speak?  The truth is that the market was headed up anyway. Had this rule been passed just prior to the S and P 666 low on March 49, we might have had a different outcome.  

It is important to note that the FASB vote took place while the market had already begun rising, hence the news fuled the hope of the participants. In a bull phase, all news is bullish. Prior to March 9, all headlines read that the world was ending, fueling more fear. Now that hope is displacing fear, the news is deemd to be bullish. The green bar occurs amid today's hyperlinked headline.