FACTBOX - SEC issues clarifications on mark-to-market

NEW YORK (Reuters) - The U.S. Securities and Exchange Commission told financial services firms on Tuesday they do not need to use fire sale prices when evaluating hard to price assets.

The following is a summary of some of the key points in the document released by the SEC.

* "Management estimates" are acceptable for use in fair value when an active market for a security does not exist.

* In some cases, using "Level 3," or unobservable inputs, to come up with fair value, may be more appropriate than using "Level 2" or observable inputs. Under U.S. accounting rules, a "Level 1" asset can be marked-to-market based on a simple price quote in an active market. But the price of a "Level 2" asset is "mark-to-model" and is estimated based on observable market prices and inputs. A "Level 3" asset is so illiquid that its value is based entirely on management's best estimation derived from complex mathematical models.

* Disorderly transactions are not "determinative" when measuring fair value. U.S. accounting rules assume that fair value is calculated for orderly transfers of financial assets between willing parties. The SEC said "distressed or forced

liquidation sales are not orderly transactions."

* Transactions that occur in inactive markets could be "inputs" to help determine fair value, but "would likely not be determinative," the SEC said.

* Other-than-temporary asset impairments are matters that often require the exercise of "reasonable judgement

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