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October 01, 2010


Edith Orenstein

One of your most thought-provoking posts, and a lot of deep insight, as usual! Not saying I agree or disagree on 'opinion' stuff, but you raise very good questions and provide very good insights.

Another leg to the stool to consider is auditability of the standards that will result from this framework - as noted in SAG discussion paper recently released in advance of Oct. 14-15 SAG meeting, particularly regarding increase in fair value and certain other estimates.


Hi Tom,
I agree that the academics should be more involved in the standard setting. But I have no idea what they(professors & phds) are doing these days!
Flipping through Accounting Review or Accounting Horizons or any other academic journals, I only see atricles full of math fomulas or statistical samplings, the exact oddity that Abe Briloff criticized many years ago.
So I don't think it is fair to say that the academics are "shoved to the side by standard setters". Quite contrary, the academics choose to show off their math skills, instead of debating real accounting issues. They need to wake up to face the real world.

Tom Selling

Hi, Steve:
I agree with your assessment for the most part, but there are plenty of active academics that are capable of joining the debate. The Accounting Establishment has made it clear that they are not welcome, unless they allow themselves to be placed in a controlled environment (like one Board member; or like the members of the FASB Research Initiative). I believe that The Academic Establishment shares some (though not the majority) of the blame.

Tom Selling

Hi, Edith:
As you might imagine, I have rather strong views on how auditors should be involved with fair value measurements. Bottom line: that should be somebody else's business.

When I get the time, I'll explain more in a post. Thanks for adding to the incentives for me to do that -- and as always, for your encouraging words.

William Mister

The search for principles, as you know, harkens back to Payton and Littleton vs. Sanders, Hatfield & Moore. Then again, Moonitz’s ARS [Accounting Research Study] 1 & 3, versus Grady’s ARS 7. Dozens of other giants contributed to the debate. How many times will we turn the wheel and not go forward?

Maybe if there was a vehicle for open discourse about the issues progress could be made – a relevant journal? I am probably showing my age in that blogs may be today’s source of open discourse and journals are irrelevant.

Michael Pakaluk

I find your comments interesting, and yet I think they miss the mark this time. I think the document is using the word "conceptual" in the sense of "general", i.e. it is a framework intended generally for any accounting standard and does not itself directly guide practice.

The document does not wish to state principles, but rather criteria which even principles must satisfy (insofar as principles are regarded as higher order rules), viz. they must be directed at the appropriate goals or objectives, and they need to have characteristics of relevance, faithful representation, etc.

I really do think that the SEC's "Study Pursuant to Section 108(d) of Sarbanes Oxley" is one of the best things written on this subject, and I find the new conceptual framework wholly in line with the recommendation there to speak of "objectives-oriented" standards rather than "principles-based".

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