Comment on this Article

You are here: Home : Article : Comment on this Article

Fair Cop Fair-value accounting becomes a political issue.

Economist Staff, The Economist
October 2, 2008

Cost is Fair Value, Just Older: When something is purchased, created, sold, etc. it is a fair value originally and then carried at that market price but called historical cost.

The issue is providing timely relevant fair value information. If the USA is probably the most capitalistic nation in the world, why is it the least likely to use fair value accounting? Due to realized asset losses and the impact on income.

Yet, fair value ties well to a market (net present value probably even better), and thus, the market is based on fair value. Historical cost is outdated and does not provide the most recent substantive measurement truth to be representationally faithful of the occurring economic circumstances.; Posted by David Newman | Oct 2, 2008 4:02 PM ET