Office of the Chief Accountant:
Letter from SEC Chief Accountant to Accounting Standards Executive Committee addressing potential project on blockage factors

November 30, 2000

Mr. Mark V. Sever
Chairman, Accounting Standards Executive Committee
Ernst & Young LLP
111 North Canal Street
Chicago, IL 60606-6301

Dear Mark,

On October 4, 2000, representatives of the Planning Subcommittee of the Accounting Standards Executive Committee (AcSEC) met with the SEC staff to discuss the status of existing projects and the scope of new ones. At that meeting, we discussed a potential AcSEC project on blockage factors. That project would address the use of a blockage factor in estimating the fair value of an unrestricted investment if a quoted price in an active market is available.

At that meeting, I indicated that the staff believes AcSEC should not pursue this project until such time as broader guidance on valuation models and methodologies used to measure fair value is completed. With the significant need for additional work in this area, I have separately encouraged the AICPA to take a leadership role to improve the quality and comparability of fair value measurements, and the auditing of those measurements. A copy of that letter is attached.

If you have any questions or would like to discuss these issues further, please contact Jackson Day or David Kane at (202) 942-4400.

Sincerely,

Lynn E. Turner
Chief Accountant

cc: Arleen Thomas, American Institute of Certified Public Accountants

Attachment

http://www.sec.gov/info/accountants/staffletters/acsec113000.htm