Principles-Based versus Rules-Based Accounting Standards

If you were to pose a question to any undergraduate accounting major with familiarity about IFRS as to what is the primary distinction between IFRS and U.S. GAAP, you’d probably get the response that IFRS is principles based and U.S. GAAP is rules based.  It’s a notion that was promoted by former IASB Chairman Sir [...] Read more > >

Fair Values and Private Companies

In the most recent The Accounting Review (Vol. 87, No. 2), Caskey and Hughes examine how alternative fair value (FV) measures affect the ability of debt covenants to mitigate suboptimal investment decisions.  A primary result from the paper is that the FASB’s “highest and best use” measure of fair value is dominated by more conservative [...] Read more > >

Accounting for Asset Securitizations

The most recent issue of The Accounting Review (March 2012) contains a study by Barth, Ormazabal, and Taylor that examines the association between two measures of credit risk and asset securitizations.  I found the study to be interesting and relevant to standard setters. Accounting for asset securitizations is controversial, and critics have charged that GAAP [...] Read more > >

Why is the Bank Lobby Against FV-NI?

Financial institutions complained loudly two years ago when the FASB issued a proposed standard on financial instruments that would require fair value reporting for loans with changes in FV being recognized in earnings (FV-NI).  I would describe the bases for these complaints falling into two broad categories.  The first category is the notion that it [...] Read more > >