The title link is to a very thoughtful and authoritative set of arguments against fair value accounting by a previous chair of the Federal Deposit Insurance Corporation. William Isaac argues, cogently, that the current recession is largely caused by mark-to-market, aka 'fair value', accounting and that the previous, historical cost system served us well for decades. He argues the Savings and Loan crisis of the 1980s had the potential to be much worse than the current crisis but serious harm was averted because banks were permitted to carry items at the lower of cost or economic value rather than being required to mark them to temporary unrealistic values.
My thanks to Stella Fearnley for pointing this piece out to me.
Shirts
14 hours ago
1 comment:
Fair value is the way to go.For the investor who is out there if we give him financial statements that have been prepared on historical basis they will be of no use or they will mislead that investors.For instance if there was no standard on hyperinflationary economies to report in then i greatly feel that the financial statements for those entities that are in those economies will be useless.To this end i strongly feel that the fund managers and some people who have caused this crisis are using FAIR VALUE ACCOUNTING AS A SCAPEGOAT.We should not have an attitude to blame the same frameworks that we have used in the and have worked out just because we are in a problem.To boost investor confidence in the financial reporting frameworks.
POSTED BY BLESSING MHIZHA TRAINEE ACCOUNTANT
Post a Comment