Accounting shift could change how banks value gold, oil stockpiles

The Financial Accounting Standards Board (FASB) voted on May 27, 2026, to let some banks put a market-price tag on gold, silver and oil stockpiles-a change that could spare financial firms from ugly earnings swings caused by accounting quirks.

The proposal would apply to companies covered by Topic 942, the accounting guidance for depository and lending institutions. FASB directed its staff to draft a proposed Accounting Standards Update and put it out for a 45-day public comment period.

Fixing an accounting mismatch

At the center of the issue is an accounting mismatch that can hit financial institutions holding physical commodities while using derivatives or other contracts to hedge them.

Today, a bank may have to carry the physical commodity at cost, while the related derivative gets marked to fair value. That can create swings in reported earnings even when the bank has economically hedged the position.

Several board members said the change is meant to even out treatment among large financial institutions. Some firms previously received permission to measure commodities at fair value, while others did not.

"We have identical entities, some of whom can fair value it and some of whom can't," FASB Chair Richard Jones said.

Jones later called the current situation a "bizarre mixed practice" that "probably wasn't well rooted in GAAP." 

Proposal kept narrow 

The board kept the proposal narrow. FASB staff said outreach showed little support for extending the new accounting to nonfinancial companies, including mining, oil and gas, agriculture and food businesses. 

Those companies generally do not manage inventories on a fair value basis and often find current inventory accounting useful, staff said.

FASB also decided not to define "commodity" in the proposed rules. Staff said the financial institutions affected by the proposal already understand the tangible commodities they hold, and a formal definition could clash with regulatory definitions or add unnecessary complexity.

The board also declined to add activity-based restrictions, such as requiring that commodities be held for trading, managed on a fair value basis or not subject to further processing. Board members said the narrow institutional scope should avoid many problems that would come with a broader commodities project.

Optional or required? 

The fiercest debate centered on whether fair value should be required or optional.

Board members Joyce Joseph, Frederick Cannon and Christine Botosan favored requiring fair value for all commodities within the proposal's scope. They argued that fair value would give investors more comparable and relevant information and reduce the risk that companies could use optionality to manage earnings.

"We are not an option board. We are a standard-setting board," Botosan said.

Joseph said investors often see fair value as the most useful measure for these assets because it provides current market-based information.

But a majority backed an accounting policy election instead of a mandate. Those members said the project should fix a narrow accounting mismatch - not reopen the broader question of how banks should measure all commodity holdings.

Vice Chair Hillary Salo said the proposal would give certain institutions a lower-cost way to reach a fair value result without relying on hedge accounting.

"I don't view this project as a referendum on what assets a bank should fair value," Salo said.

No cherry-picking gold bars

The board rejected staff's initial recommendation to allow the election item by item. Instead, FASB chose an election by type of tangible commodity.

That means a financial institution could choose fair value for all its gold holdings while leaving silver at cost. But it could not mark one gold bar to market and keep another similar gold bar at cost.

Board members said that approach would curb cherry-picking and improve comparability.

Susan Cosper said a mixed model at the individual-commodity level could confuse investors and create incentives to manage earnings. She supported an accounting policy election by commodity type.

New disclosures required

Companies using the new approach would have to disclose which types of tangible commodities they measure at fair value and which they do not. They also would have to explain why they made the election and disclose the carrying amounts of commodities measured at fair value and at cost.

Commodities measured at fair value would fall under FASB's existing fair value disclosure rules in Topic 820.

Jones warned staff not to call the proposal a "fair value option," saying that phrase could be confused with existing guidance for financial instruments. He said the board should describe it as a policy election to measure certain tangible commodities at fair value.

Transition

FASB also agreed to a cumulative-effect transition approach. Companies adopting the guidance would record the effect of the change in retained earnings, or another appropriate equity component, at the start of the fiscal year of adoption.

Early adoption would be allowed after FASB issues a final standard. If a company adopts the guidance during an interim period, it would apply the change as of the beginning of that fiscal year.