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Fair Value Accounting Being Challenged Overseas | CFO Lounge

Fair Value Accounting Being Challenged Overseas

Mon, Oct 20, 2008

Down to Business

Japan’s Finance Minister is announcing a review of mark to market rules to determine if a better valuation standard can be applied. If indeed another standard were created it would have to be partly based on speculation and that would entail, as one UBS analyst put it, creating a “black box” pricing methodology around these assets.

Holy shit, a “black box” investment pricing methodology? I think the analyst is going a little far…but still; what accurate and reliable model could you possibly use that would predict a future price and therefore gains or losses at a specific future date? I have no freaking idea…does anyone?

Be careful here, Mr. and Mrs. Rule Makers. You need to think long term, not today or tomorrow, when you consider changing accounting rules. If you have a concrete methodology that scales with the economy 95% of the time, I’m of the opinion that you hold on to it.

Tough times do call for tough measures, but not stupid ones.

This post was written by:

Chad Cohen - who has written 51 posts on CFO Lounge.


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