A new GAAP accounting standard that allows insurers to select financial assets and liabilities to be reported at fair value is upon us. The new standard presents insurance company managers with serious challenges in choosing which assets and liabilities to report using fair-value accounting, and in making appropriate disclosures about their choices.

The Financial Accounting Standards Board has issued its Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities." At the same time, FASB established a new standard for measuring "fair value"–Financial Accounting Standards No. 157, "Fair Value Measurements."

For the first fiscal year beginning after Nov. 15, 2007, entities reporting under U.S. generally accepted accounting principles (GAAP) can choose to measure many financial instruments at fair value.

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