U.S. authorities are working on additional guidance regarding the application of fair-value accounting.

The U.S. Securities and Exchange Commission’s Office of the Chief Accountant and the staff of the U.S. accounting standards board, FASB, have been engaged in consultations with investors, accountants and auditors, on the application of fair-value measurements in the current market environment.

Certain market players have argued that the application of fair-value accounting has exacerbated the pressure on firms amid illiquid markets and have called for regulators to suspend its use for financial institutions. The bailout package voted down in Congress on Monday included a provision restating the authority of the commission to suspend the application of fair value accounting and requiring it to study the issue.

The SEC says that there are a number of practice issues for which there is a need for immediate additional guidance and that FASB is preparing to propose additional interpretative guidance on fair value measurement under U.S. generally applied accounting principles later this week.

In the meantime, SEC and FASB staff are providing immediate clarifications on certain issues, which are intended to help preparers, auditors, and investors address fair-value measurement questions that have been cited as most urgent in the current environment.

However, in a letter to members of Congress, the Center for Audit Quality said it believes that proposals advocating suspension of mark-to-market (or fair-value) accounting are not in the best interest of investors or the capital markets and should be rejected.

“The principles of mark-to-market accounting are rooted in the fundamental virtue of transparency and are central to informed market decisions and efficient allocation of capital. In our view, investor confidence would be undermined by efforts designed to mask the actual value of financial assets at a given point in time,” it says.

“It is important to underscore that mark-to-market accounting has contributed positively to revelations about the severity of the economic crisis facing our country’s credit markets and certain institutions, but it did not create the economic crisis,” it adds.

The CAQ notes that some have called for the suspension of fair-value accounting for certain financial institutions. But it stresses that “although determining fair values for financial instruments in an illiquid market can be challenging, the best estimate of the prices that would be received for such instruments in orderly transactions occurring at the measurement date remains the most relevant information for investors and policymakers.”

“If there are concerns with the impact of asset valuations on capital requirements of financial institutions, regulators have alternatives other than obscuring information relevant to investors. Regulators may modify those requirements based on criteria other than fair value accounting measurements to the extent they deem appropriate,” the CAQ says.

“While a restatement of existing SEC authority and a study of mark-to-market accounting and its effects are not necessarily harmful in their own right, efforts to weaken the transparency provided by the current standard should be avoided, especially in this time of financial instability,” the CAQ concludes.