Important.

Just in time for earnings.

By Marine Cole
October 10, 2008 2:05 PM ET

The Financial Accounting Standards Board adopted new guidance on
fair-value accounting in illiquid markets today, giving financial
institutions more leeway to valueg financial instruments based on
internal inputs.

The board will release its final guidance Saturday, and it will be
effective upon issuance.

"I think it's safe to say when we wrote [Financial Accounting Standard
157 on fair-value accounting], we probably didn't contemplate exactly
the current situation that's developed in the credit and financial
markets," Robert Herz, chairman of FASB, said during today's meeting.

"Under such conditions, it's important to understand and apply both
the objective of 157 and the framework," Mr. Herz said. "By doing
that, it will require in some cases more analysis, more judgment."

In late September, FASB and the Securities and Exchange Commission
issued a joint clarification allowing companies to use more internal
inputs, related to future cash flow, for instance, when markets are
inactive and it is difficult to find trading prices.

FASB issued a proposed staff position on Oct. 3 clarifying the
application of FAS 157 on fair-value measurements in an inactive
market by providing an illustrative example.