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Fair Values Good, Historical Costs Bad - Essay Example

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The accounting profession is one of the pillars of capitalism, a great invention of the modern era because it allows for transparency, fairness, and trust in the conduct of business (Johnson, 1975)…

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Fair Values Good, Historical Costs Bad

Accountants, not known for devising convenient mnemonics beyond “Debit Left, Credit Right”, have in the last two years or so found a reason to devise a new one as in our title. Why so? Are accountants finally rising up in arms against the wave of bad publicity generated by the recent scandals of the profession? Have the bean-counters tired of numbers? What in the balance sheet’s name is happening? The simple reason for the new mantra is that the accounting profession has decided on a new set of standards for the valuation of assets. Perhaps never before in accounting history has an issue generated such controversy as the debate between fair value and historical cost, which is reaching mythic proportions as a battle between good and evil. The accounting profession is one of the pillars of capitalism, a great invention of the modern era because it allows for transparency, fairness, and trust in the conduct of business (Johnson, 1975). Without accounting standards, it would have been impossible for the world of business to have gone as far as it has, simply because we would not have many of the aspects of business that we now take for granted. ...
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