Summary: Concerns have been raised that the current use of historical cost accounting by banks has helped to mask both the true value of their assets and the need for earlier intervention by regulators to limit insurance fund losses. Also, 1991 legislation requires federal banking agencies to jointly develop a method for insured depository institutions to provide supplemental disclosure of the estimated fair market values of their assets and liabilities. This report provides a summary and analysis of the responses received by the Federal Accounting and Standards Board on its December 1990 exposure draft of a proposed Statement of Financial Accounting Standards entitled Disclosures About Market Value of Financial Instruments. The Board also issued a final accounting standard a year later--Statement of Financial Accounting Standards no. 107 entitled Disclosures About Fair Value of Financial Instruments. With some exceptions, the standard requires all entities to supplement their historical cost financial statements with disclosures about the fair values of financial instruments reported in those statements. The standard will be effective for 1992 financial statements, except for companies with less than $150 million in assets, which have another three years to comply with the standard.
