The Center for Audit Quality defended the use of fair value accounting in a letter to the Securities and Exchange Commission as the standard comes under attack from banking interests.

"The CAQ believes that blaming the current crisis on the use of fair value measurements in financial reporting, the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 157 or the application of FAS 157, misreads the fundamental economic and regulatory underpinnings of the crisis, and inhibits efforts to address the crisis effectively," wrote executive director Cindy Fornelli in a letter commenting on the SEC's study of mark-to-market accounting.

She noted that while further clarification and improvement of how fair value measurements are made and presented in financial statements could be beneficial, the current use of fair value measurements for financial instruments should not be changed and FAS 157 should not be suspended.

Fornelli (pictured) acknowledged that providing fair value measurements in distressed or illiquid markets could be a challenge and require significant judgment by accountants and auditors, but she argued that fair value remains the most relevant and useful measure for users of financial statements and enhances transparency for investors.

"The CAQ believes that it would be detrimental to the confidence of the marketplace to alter the fair value accounting model in any way that reduces the credibility, consistency and neutrality of reported information," she concluded.

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