WASHINGTON (1/14/09)—The Financial Accounting Standards Board (FASB) approved changes to its guidance for determining impairment of certain debt securities. Historically, there have been two similar models for determining when a security is other-than-temporarily-impaired (OTTI), but they included some key differences. One of FASB's primary objectives in issuing the amended guidance was to increase consistency between the models, an objective supported by the Credit Union National Association (CUNA). CUNA Regulatory Research Counsel Luke Martone reviewed the changes and noted they shift the determination of impairment from market participants' assessment of cash flows to management's assessment. “That’s a change supported by CUNA and by many in light of the current dislocated market,” Martone said. He added that while the guidance modifies the method for determining when securities are OTTI, a subsequent requirement that such securities are then to be written down to their fair value is unchanged. In its guidance EITF 99-20-1, FASB noted that a determination of OTTI requires analysis and judgment based on all available relevant information. It stated that it is “[i]nappropriate to automatically conclude that a security is not other-than-temporarily-impaired because all of the scheduled payments to date have been received,” nor is it appropriate to “automatically conclude that every decline in fair value represents an other-than-temporary-impairment.” According to Martone, the new guidance was not approved unanimously by FASB. Some dissenting board members maintained that the FASB staff position (FSP) “does not result in sufficient benefits to investors to warrant its issuance.” “While CUNA supported the change, we agree that it does not afford complete relief from the problems related to applying fair value standards to securities that are not intended to be sold,” Marton said. CUNA will continue working to improve the application of fair value standards to credit union assets. “The dissenters’ primary concern is that this FSP will only lessen the already shaky confidence of many investors, and that ‘the majority of investors who responded [to FASB’s proposal] strongly opposed the FSP,’” Martone explained. He said they maintained that FASB’s rules should focus on investors. The FSP is effective for interim and annual reporting periods ending after December 15, 2008, and are to be applied prospectively.