Chairman Bernanke, speaking at the Council on Foreign Relations, had a few words to say about valuations:
The ongoing move by those who set accounting standards toward requirements for improved disclosure and greater transparency is a positive development that deserves full support.
However, determining appropriate valuation methods for illiquid or idiosyncratic assets can be very difficult, to put it mildly.
Similarly, there is considerable uncertainty regarding the appropriate levels of loan loss reserves over the cycle.
As a result, further review of accounting standards governing valuation and loss provisioning would be useful, and might result in modifications to the accounting rules that reduce their pro-cyclical effects without compromising the goals of disclosure and transparency.
Indeed, work is underway on these issues through the Financial Stability Forum, and the results of that work may prove useful for U.S. policymakers.
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