For more than 20 years, FASB and the International Accounting Standards Board (IASB) have been on a steady march to radically overhaul the foundations of corporate accounting in Europe and the United States. Statement of Financial Accounting Standards (SFAS) 159, The Fair Value Option for Financial Assets and Fianancial Liabilities, enacted in February 2007, represents a watershed event in FASB’s drive toward a full fair-value basis for financial accounting. While most CPAs are at least broadly familiar with recent controversies over fair value measurement, the scope of FASB’s fair value agenda remains largely underappreciated by the profession. Meanwhile, the assumptions and long-term goals of fair value accounting are now essentially taken for granted by its proponents within FASB and the IASB.
The profession’s limited responsiveness to FASB’s fair value agenda is not entirely accidental. The inattention of the broader profession to accounting policy has allowed FASB and the IASB to advance the fair value agenda largely under the radar of public awareness. In a commendable, though rare, moment of candor, one senior IASB official, speaking at an academic conference, described the highly unusual step of permitting fair value accounting at the preparer’s option as a way to “let in fair value without scaring the horses.” FASB has moved in lockstep with the IASB on this issue, introducing its own “Fair Value Option” (now SFAS 159) exposure draft in January 2006. Because SFAS 159 does not require companies to adopt fair value reporting, those who disagree with it might be led to believe that they can safely ignore the standard. FASB’s statements strongly suggest, however, that, absent a strong message to the contrary from the accounting and financial community, fair value is unlikely to remain “optional” for long.
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