Houston -- May 8, 2009
Effective June 15, 2009, all public companies must follow new regulatory reporting guidelines on OTTI securities, including:
- Use fair value (mark-to-market accounting) as stated in FAS157
- Frequency for reporting the fair value of financial instruments changed from annually to quarterly
- Impairment charge is NOT required if there is no current intention to sell the instrument AND, it is more likely than not, it will not be required that the instrument is sold prior to the fair value recovering
- Designation of the intent and ability to hold until the fair value recovers determines the need to report an impairment charge on the balance sheet or the income statement
- The portion of the impairment related to just credit losses must be reflected on the company's income statement as a reduction of net income, while the impairment related to all other factors will appear in the Other Comprehensive Income line in the equity section of the balance sheet
These rules do not affect the timeliness of impairment recognition - only the location in the financial statements where impairment value is reported.
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