FASB Chairman is Bullish on Fair Value

If U.S. accounting practices swing to fair value, it will be in large part due to the efforts of Robert Herz, chairman of the Financial Accounting Standards Board (FASB), according to an article in the February issue of CFO magazine. Herz, a former member of the International Accounting Standards Board (IASB), is an advocate for fair value, which he believes is a better measure than historical cost.

Herz argues that company management and investors have different perspectives when it comes to financial reporting. While management tends to focus on budgets and metrics, investors want to know the effect of external events on the enterprise value. Herz thinks that historical cost favors management’s needs and fails to provide investors with the information they require.

Despite Herz’s enthusiasm for fair value, the business community hasn’t been won over yet. Historical cost supporters point out that because fair value can fluctuate widely, it can be difficult to compare financial statements across periods. Historical cost, they argue, is more reliable.

Proponents of fair value counter that their method provides greater relevancy and that historical cost numbers are only reliable the day they are recorded in the books.

You may like these other stories...

While reputational risk is the No. 1 nonfinancial concern among corporate directors, cybersecurity/IT risk is gaining steam. In fact, both private companies and organizations with more than $1 billion in revenue felt they...
We've all been there. Trying to make our work-lives more efficient, transfer knowledge to newer team members, and leverage our practices. Sometimes it works, and sometimes, well, the result is embarrassing at best.Here...
From May 20-23, the Association for Accounting Marketing (AAM) held its annual conference. Frequent contributor Sally Glick picked up some ideas that she will be sharing with us in the coming days, as she has done in...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.
Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.