AMERICAN INTERNATIONAL Group (AIG) is urging regulators to change controversial accounting rules on asset valuations to stem the tide of writedowns that have wreaked havoc on Wall Street.
The US insurer, which this month recorded a record quarterly loss after an $11 billion (€7 billion) mortgage-related writedown, is the first company publicly to air a proposal to move away from "fair value" accounting.
It reflects the fears of bankers that the rules, which require companies to mark assets to their current market value, have overstated financial groups' losses and forced them into emergency fundraising.Western investment banks have recorded more than $180 billion in writedowns and losses and raised more than $40 billion dollars from outside investors since the onset of the credit squeeze.
Analysts expect further writedowns when US banks begin to report earnings next week.
Under AIG's proposal, which has been presented to regulators and policymakers, companies and their auditors would estimate the maximum losses they were likely to incur over time and only recognise these in their profits.
All other unrealised losses would be recorded on the balancesheet but would not affect profits. In AIG's case, this method would have reduced the impact of the $11 billion writedown on fourth-quarter results to $900 million.Any change would have to be sanctioned by the US Financial Accounting Standards Board or Securities and Exchange Commission. - (Financial Times service)
