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In a hotly debated and controversial move, the Financial Accounting Standards Board (FASB) voted 3 to 2 in favor of new guidelines for all public companies to follow in accounting for impaired securities, such as mortgage-backed securities. The new guidelines on reporting on what are called “other than temporarily impaired” (OTTI) securities, came in the wake of threats by the House Finance Committee to pass legislation ordering the change, and after intense lobbying by many banks. The requirements were adopted in conjunction with two other guidelines, which essentially reaffirmed the FASB’s original principles of fair value or market-to-market accounting in FAS 157, and increased the frequency for reporting on the fair value of financial instruments from annually to quarterly.

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