In 2008, we were at the height of the financial crisis. William Issac,
former chair of the FDIC, blamed the crisis on the accounting rules
that the federal government enforced. At the time, a lot of bankers
and investors agreed with Mr. Issac. The accounting rules that were
being blamed were the "fair value" accounting that was led by the
Governmental Accounting Standards Board (GASB). Although the
accountants for bankers and investors hated the fair value
accounting, they were being made a big part of how local and state
governments "manage their pensions, investments, and health care"
(Marlowe, 201 5).
According to the author, fair value is seen as fair by some and unfair
by others, based on what side you are on. During the crisis, the
financial industry pushed the Securities and Exchange Commission to
do better at reporting fair market values. They argued that this would
lead to a better reflection of "normal market conditions" (Marlowe,
201 5). At the same time, GASB opened up its fair value framework,
even though most of its stakeholders disagreed with the definition of
fair value.
I agree with the author that there are always two sides to a coin, and
depending on your side will greatly influence how you feel about fair
value accounting. I prefer cost accounting over fair value accounting.
I think that is because I'm more comfortable with the rules associated
with cost accounting. If I was in a different role or a different
company and needed to know the fair value of an asset over time,
I'm sure that would be my preferred accounting method.
Marlowe, J. (201 5, December). Is 'fair value' accounting actually
fair?. Retrieved
from www.governing.com/columns/
public-money/gov-fair-value-
accounting.html
