SEC Releases SAB 111 on OTTI

This afternoon, the SEC released Staff Accounting Bulletin No. 111 (SAB 111), which amends SAB Topic 5-M on Other Than Temporary Impairment [OTTI] of Certain Investments in Debt and Equity Securities. Here is the SEC's press release and here is SAB 111. Props to Securities Mosaic, which got the word out to its subscribers earlier today.

SAB 111 notes that FASB Staff Position (FSP) No. 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (“FSP 115-2”), issued last week, was scoped to debt securities only, and the FSP referred readers to SEC SAB Topic 5-M for factors to consider with respect to OTTI for equity securities.

SAB 111 states the SEC staff's view that when FASB chose to use the words "other than temporary impairment" in FAS 115, that FASB did not intend for that term to mean 'permanent' impairment. The SAB goes on to state that numerous factors should be considered in evaluating if there has been OTTI of an equity security that is classfied as Available for Sale, for which a write-down would be required, and provides some suggested factors to consider (not an exhaustive list).

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