Fair value causing problems in the US
July 17, 2008
CFO.com has come out with an article that makes a lot of sense to me.
It will take more than a change in rules to make companies comfortable with the move to fair value accounting. It will take a change in “mindset,” predicts Gary Kabureck, the chief accountant and corporate vice president at Xerox Corp.
This is something I’ve expressed to Francine McKenna when talking about the merits of rules based systems. In my experience rules are ther to be negotiated or broken. Either way, it is unsatisfactory. Fair value requires a differernt way of looking at assets and liabilities. It is not without difficulty but it is possible. Financial analysts and acturaries make these assessments all the time. Of course that takes the matter out of the hands of professional accountants but that’s a good thing. What’s more, it provides auditors independent evidence of the values on which they are expected to report, but on which they don’t have the expertise.
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And then, there’s decision usefulness and economic relevance! At any rate, we’re thinking alike on this, I guess.
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