Fair value tug-of-war continues
January 26th, 2009 by Will AndronicoThe question of whether fair value is, well, “fair” could be sorted out sometime soon, although the priority placed on addressing the issue remains in question. This is reflected nicely in a pair of CFO Magazine articles that paint a picture of a true tug-of-war going on from ocean to ocean.
As the magazine writes in its January 20 article, What’s More Important than Fair Value? Plenty a panel of experts from the Financial Crisis Advisory Group (FCAG), assembled by the International Accounting Standards Board and the Financial Accounting Standards Board, met in London to discuss where the focus should lie over the next year:
The call to shut down fair-value accounting, especially for financial instruments in illiquid markets, may be waning…For his part, former U.S. Securities and Exchange Commission chairman and FCAG cochair Harvey Goldschmid said that the group had reached something of a consensus about keeping fair value accounting, but working to improve it.
On the other hand, the magazine also reported on January 16 in Volcker Calls for a New Look at Fair Value that a new report by the Group of 30 suggested a greater sense of urgency. It states:
Calling for a fresh look at current mark-to-market financial reporting rules, Paul Volcker, a top economic adviser to President-elect Obama, has signed off on a financial-reform program more sympathetic to bankers’ views than the current Financial Accounting Standards Board’s fair-value regime has been thought to be. The group [of 30 recommends that] fair value accounting principles and standards should be reevaluated with a view to developing more realistic guidelines for dealing with less liquid instruments and distressed markets.
We will continue to monitor the seesaw of motivation; as the new administration begins work, will fair value modifications rise to the top of the To Do list?
