Surveying The S&P 500 Financials: 2Q09 Fair Value Effects: The trio of FASB’s April turbo-standards related to fair value reporting have now been adopted by all publicly-traded companies. In brief, those standards made the recognition of other-than-temporary impairments less painful to report because firms could direct parts of the charges to other comprehensive income; made it easier for firms to employ “Level 3” reporting of asset or liability valuations; and increased the frequency of supplemental fair value reporting.
Because they deal most directly with financial instruments, those three amendments have the greatest impact on financial institutions. In this report, the magnitude of those effects are presented for the 79 firms composing S&P 500’s financial sector. Some findings: banks saved more than a $1 billion in regulatory capital, thanks to the sweetened other-than-temporary impairment rules; the entire S&P 500’s earnings benefitted by nearly $5 billion and over 4%; and fair value disclosures showed a surprising lack of confidence in the credit markets for the insurance industry.