Wednesday, July 15, 2009

Mark-to-Market Still Unpopular with Companies That Aren't Interested in Reality

Because we know that you were worried that the mark-to-market debate was dead...FEAR NOT. The IASB released proposed amendments to IAS 39 yesterday that will get more than a few companies bent out of shape. The first being French and German insurance companies that are threatening to dump asstons of securities if the amendments are passed.

The long/short of the amendments is that securities would be thrown into one of two groups. Group 1 would be marked-to-market, Group 2 would be held at amortized cost (English Translation: what you paid for it less periodic non-cash reductions).

SHOCKER: the insurance companies don't like Group 1. John Carney at Clusterstock provides the details on the insurance companies' temper tantrum argument:
The German insurers have said this rule would require them to dump the stocks they hold in their portfolio, since the effects of market volatility on their capital position would be unbearable. So far the finance ministers of Germany and France support the insurers, who are calling for softer, more flexible rules. The European Commission is reportedly supporting the IASB.

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