The SEC is relaxing enforcement of a controversial rule in a bid to ease pressure on banks during the financial crisis, the New York Times reports. Current accounting rules require companies to value assets at a fluctuating fair market price. In the current financial chaos, values are rapidly heading south, forcing companies to report huge quarter-to-quarter losses.
The SEC is not changing the rule, but will now begin interpreting the rule loosely enough to give companies some breathing room. “Investors can be well served if they understand that from quarter two to quarter three management has developed a different interpretation of fair value—and they provide a reconciliation of the change," said a securities analyst.