I first want to mention that I see this article has been chosen a few
times. I looked at a few articles and this one was by far the most
informative but I will add another that I also found interesting as
well. My discussion will be on Charles Lee's article.
Charles Lee argues, "fair value accounting goes against the
fundamental purpose of accounting. It would actually inject more
uncertainty into financial reports and make life harder for
shareholders. It might even create new opportunities for companies
to cook their books" (Andrews, 2021).
Under GAAP, accounting is to report on the financial information of
the company's performance and financial position accurately and
trasparently. Charles Lee goes on to explain how it is not the
accountants' job to predict the future or forecast anything but rather
present the facts of the financials accurately and truthfully. "Lee isn’t
disparaging market valuations. In fact, he argues that the most
important component of a company’s market value lies in
shareholder expectations about its future earnings. But the purpose
of accounting isn’t to make those forecasts, he insists. The purpose is
to give shareholders the tools they need to make their own
forecasts" (Andrews, 2021).
I agree with his views. The implication for companies based on this
article is that they are not getting accurate information. During a
crisis, the fair value is not going to be accurate given the economic
state and will not fairly reflect what something's value is. As an
accountant, I would rather see cost accounting vs fair value
accounting. I believe cost accounting captures the true value of an
asset.
https://sfmagazine.com/wp-content/uploads/sfarchive/2012/11/
FINANCIAL-REPORTING-Another-Fair-Value-Controversy.pdf
https://www.gsb.stanford.edu/insights/charles-lee-why-fair-value-
accounting-isnt-fair
Andrews, E. L. (2021, March 23). Charles Lee: Why Fair-Value
Accounting Isn’t Fair. Stanford Graduate School of Business. Retrieved
March 24, 2022,
