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The Financial Accounting Standards Board has approved by a 3-2 vote changes to its other-than-temporary impairment guidance that should reduce the amount of charges banks and other holders of mortgage-backed securities have to report in the fourth quarter. The new guidance (first proposed on Dec. 19) allows management to make a "reasonable judgment" of future cash flows of debt securities in determining impairment. Previous guidance required consideration of what "market participants" would use in determining the current fair value of MBS. At Wednesday's meeting, the board amended the proposed guidance to stress that MBS holders are required to assess collections of future cash flows even when the securities are performing and borrowers making timely payments. In making that assessment, MBS investors must consider all available information reflecting past events and current conditions in developing estimates of future cash flows. "I don't think it represents amnesty on OTTI in the fourth quarter. It still requires an assessment of the collectibility of the cash flows," said FASB member Leslie Seidman. Board members also stressed that the new guidance is not retroactive to the third quarter or previous periods.