The use of fair-value disclosures to assess liquidity and solvency in credit decisions

The Financial Accounting Standards Board (FASB) determined how bank loan officers treat fair-value (FV) disclosures of assets and liabilities in credit decision-making. Results of the study revealed that lending officers make use of the values found in the body of the balance sheet in evaluating liquidity and solvency to the exclusion of data found in the footnotes. Results remain unclear as to the loan officers' preferences for FV or historical-cost data in credit assessment.