-163- change FNBC’s method of accounting for its swaps income to a method of accounting that did clearly reflect that income. Respondent argues that his method of accounting under which each of FNBC’s swaps is valued at its midmarket value clearly reflected FNBC’s swaps income for each relevant year. Petitioner replies that FNBC properly reported its swaps income for each relevant year. Petitioner observes that FNBC: (1) Calculated and reported as swaps income the mid-market values of its swaps and (2) offset that reported income by adjustments for credit risk and administrative costs connected with the swaps. Petitioner alleged in its petition that FNBC’s adjustments were necessary to defer income to match related expenses. Petitioner clarifies on brief that the adjustments were necessary to reflect the fair market value of FNBC’s swaps under its mark-to-market methodology. Petitioner argues that these cases are a “valuation case”, as opposed to a method of accounting case, and that FNBC’s valuations must be sustained because its underlying methodology was reasonable. Alternatively, petitioner argues, the fact that FNBC’s methodology was reasonable means that it must prevail even if these cases are a “method of accounting case”. According to petitioner, a reasonableness standard controls our decision because (1) FNBC’s valuations were recurring and business in nature, (2) FNBC’s valuations were the result of an exercise ofPage: Previous 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 Next
Last modified: May 25, 2011