The Securities and Exchange Commission held the first of two roundtable discussions on fair value accounting standards, receiving input from accounting firms such as PricewaterhouseCoopers and Grant Thornton, along with other organizations.

Other participants included representatives of financial firms and banks such as Goldman Sachs and Key Bank. Several participants criticized mark-to-market accounting.

"Major principles of accounting are much too important to be left solely to accountants," said former FDIC chairman William Isaac, who now chairs LECG's Secura Group. "It is beyond dispute that mark-to-market accounting has been extremely and needlessly destructive of bank capital in the past year and is a major cause of the current credit crisis and economic downturn."

Other critics included two representatives of the American Bankers Association. "If an entity's business model is based on fair value, then fair value may well be the most relevant measurement," said Aubrey Patterson, a former chairman of the ABA and currently CEO of BancorpSouth. "However, if the business model is not based on fair value, then using it as the basis of accounting can be misleading to users of financial statements."

"The business model of most community banks is not based on fair value; instead, our business models are typically traditional commercial and retail banking - designed to fit the needs of our customers," said Randy Ferrell, president and CEO of Fauquier Bankshares. "Community bankers are very concerned about the complexity of fair value and about moving any further toward full fair value for all financial instruments."

However, Patterson acknowledged that fair value accounting could be useful in some contexts, as when an entity actively trades or its business model is based on fair value. "In order to be useful, accounting should be relevant, reliable, and should reflect the business model," he said. "Otherwise the result will not be representative of the economic activity nor economic reality."

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