The Financial Accounting Standards Board announced changes to the way mortgage companies can account for mortgage servicing rights.
The board recently said it issued Statement of Financial Accounting Standards No. 156, Accounting for Servicing of Financial Assets.
The new standard, an amendment to FAS No. 140, specifically addresses the recognition and measurement of separately recognized servicing assets and liabilities and provides an approach to simplify efforts to obtain hedge-like accounting.
The standard requires that, if practical, servicers initially use fair value to measure a separately recognized servicing asset or servicing liability, and subsequently use either the amortization method or the fair-value method, according to the announcement.
"The Board specifically designed this Statement to simplify and encourage more consistent accounting in this area," said Edward W. Trott, board member, in the announcement. "The Standard is the latest step in a series of projects aimed at reducing complexity while providing an approach that allows hedge-like accounting without having to deal with the complexities of Statement 133."
While early adoption is permitted, the board said the new standard is effective for all separately recognized servicing assets and liabilities acquired or issued after an entity's fiscal year that commences following Sept. 15, 2006.