A friend who is in the know of markets told me that US is suspending fair value accounting for one year as part of its armoury of measures to contain the sub-prime crisis.
I exclaimed, “No way.” I am trying to search for the authoritative article that confirms my friend’s words. Can any help me on this?
My googling led to me to this article by Karey Wutkowski and Emily Chasan from Reuters dated Sep 19, 2008. It did not mention any outright suspension but instead presented the usual arguments for and against fair value accounting.
I would be very disappointed if it was true as the true value of any law/standard can only be realised if it is put through the baptism of fire of current sub-prime financial storm.
A critic highlighted an important “hole” in fair value accounting ie. the complete absence of any markets to provide an indication of value. So the Authorities may probably have to disappoint people like Edgar by suspending fair value accounting while they work furiously trying to calm the global markets to save thousands of jobs and a few hundred billions dollars.
The article mentioned that Fair Value Accounting took effect in US this year. So could it be that the new accounting standard has “encouraged” the revelation of sub prime storm to the current scale.