More discussion of fair value’s economic impact

BVWireIssue #74-3
November 19, 2008

There’s so much to consider in the latest news on “mark-to-market” accounting rules. A recent salvo came in the form of comments from William Isaac, former FDIC chairman under Ronald Reagan, which essentially blamed Fair Value for causing the current financial crisis.

Meanwhile, the Securities and Exchange Commission’s (SEC) congressionally mandated study of “mark-to-market” accounting, as authorized by Sec. 133 of the Emergency Economic Stabilization Act of 2008, expects the report to provide insights on: 1) the result of such accounting standards on a financial institution’s balance sheet; 2) the consequence of such accounting on bank failures in 2008; 3) the impact of such standards on the quality of financial information available to investors; 4) the process used by the Financial Accounting Standards Board in developing accounting standards; 5) the advisability and feasibility of modifications to such standards; and 6) alternative accounting standards to those provided in FAS 157. The last of two SEC roundtables on the topic (be held this week on Friday, November 21) is sure to generate additional controversy.

However, at the recent ASA/AICPA National Business Valuation Conference in Las Vegas, Bob Herz, chairman of the Financial Accounting Standards Board (FASB), sought to quell such debate among BV experts in his keynote address, including  his acknowledgement that, “most people think the mixed attribute model [for accounting standards] is a problem, but how fast to change it—and to what extent—is critical. [It’s also] the source of the current controversy.”   

Herz also paid tribute to the BV community for its contributions, both past and present, to the development of financial reporting standards, saying that the “active involvement by valuation analysts is much appreciated,” and that BV practitioners can continue to play a vital role in the future of fair value models through education, outreach, “and by making sure [the] profession is all that it can be.” How can you get involved? Herz suggests the members of the profession find out more about FASB’s Valuation Resource Group (VRG), offer comment letters and participate in roundtables.   

For more on Fair Value: Check out BVR’s upcoming teleconference, Fair Value Measurement and Potential Liabilities, on this coming Thursday, November 20. The event—featuring Mike Mard, CPA/ABV, ASAof the Financial Valuation Group and also a member of the VRG, and  Tony Yanez, Esq., with the law firm of Willkie Farr & Gallagher—is sure to provide a host of important information and insights on this hot topic. For more specific information about this and other teleconference programs and specific program registration requirements, click here.

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