The board that sets U.S. accounting standards on Thursday gave companies more leeway when valuing assets and reporting losses, providing a potential boost to battered banks' balance sheets.

The independent Financial Accounting Standards Board voted to adopt new guidelines under the so-called mark-to-market accounting rules, which require companies to value assets at prices reflecting current market conditions.

The changes will allow the assets to be valued at what they would go for in an "orderly" sale, as opposed to a forced or distressed sale.

The mark-to-market rule forced banks to take steep write-downs on some assets, because it required banks to value them at fire-sale prices rather than according to their cash flows, according to Peoples Bank president David Bochnowski.

The new rule will have the immediate effect of improving banks' earnings, Bochnowski said.

"It helps restore confidence in the economy and helps restore confidence in banks," Bochnowski said.

Anything that can bring clarity to the issue of valuing assets is welcome, said Daryl Pomranke, president and Chief Operating Officer at Citizens Financial Bank in Munster.

Citizens Financial Bank will have to take a close look at the details of the new guidelines before it can judge their exact impact, Pomranke said.

"We frankly are more anxious for the general economy to improve, to get the economy going again," Pomranke said.

There was some good news on that front Thursday, as financial stocks led a rally on Wall Street. The Dow Jones industrial average added more than 200 points.

Though many banks and financial institutions lobbied for the FASB rules change, it's not popular with everyone.

"What are you trying to do here?" said Indiana University Northwest Professor of Economics Bala Arshanapalli. "Are you fooling yourself? Are you fooling investors?"

Arshanapalli said banks and financial institutions seemed to have no problem with mark-to-market when the value of their assets was soaring. But in a down market, they suddenly changed their tune.

There were others that agreed with Arshanapalli on Thursday.

"Banks need to have flexibility" in valuing assets but the fair market rule shouldn't be scrapped, Sheila Bair, the chairman of the Federal Deposit Insurance Corp., told a gathering of bank executives Wednesday. "There needs to be integrity in those bank balance sheets."

The Associated Press contributed to this report.