This story appeared in Bank Digest.
Thrifts have been given guidance on how the OTS expects them to apply generally accepted accounting principles (GAAP) to securities that have declined in value to less than their amortized cost on an other-than-temporary basis. Determining whether a security has suffered an other-than-temporary impairment is relevant to a thrift's earnings and regulatory capital, the OTS said. The decision, which the agency said is “complex and involves significant judgment,” must be made by the thrift's management, not by an outside auditor. Factors to be considered include the severity of the decline in value, the term of the decline, the volatility of the security's value, external ratings and the thrift's ability to hold the security until the value has recovered. The agency set out separate tests for debt and equity securities.