…or so says The Economist in this article.

While I generally think highly of the The Economist, this article contains one of my pet peeves, which is a loose discussion of fair value. In particular, the article states that “In 2009, under its previous chairman, Bob Herz, FASB narrowly voted 3-2 that all assets should be booked at fair value on banks’ balance-sheets” (emphasis added).

Actually, this vote was part of the boards’ financial instruments project and so would not affect the accounting for any nonfinancial asset. Some might say, well, most bank assets are financial assets. That’s fair, but banks also hold nontrivial amounts of nonfinancial assets (e.g., Bank of America had over $100 billion of PPE, goodwill, and other intangible assets at the end of 2010).

The bigger point is that a casual reader might mistakenly infer from this quote that the FASB was on a mission to extend fair value accounting to all assets for all companies. That is certainly not the impression I have ever gotten when listening to the boards deliberate on their various projects. And the inclusion of one word could help avoid misunderstanding.

Oh well, I’ll forgive The Economist this time…