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Fair Value an ''Option,'' Says FASB
Posted by Dave Cook | CFO.com | US
February 22, 2007 12:07 PM ET
Earlier this month FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. The objective, wrote the board, is to provide companies with ''the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.''

Indeed as CFO magazine observed last September after the passage of Statement No. 157, Fair Value Measurements fair value accounting could change the very basis of corporate finance.

Investors, however, might be perplexed by a lack of comparability. As Jack Ciesielski has pointed out in his AAO Weblog, "it's an option, not a mandate." Adds Ciesielski, ''companies will also likely apply it only where fair value reporting will give them a better-looking balance sheet.''

On balance, is this a win for companies but a mixed bag for investors? What do you think?
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