It might mean both numbers - [amortized] cost and fair value, are relevant, and will be presented, or it may be that both pieces of information are provided through disclosure, so both pieces of information are available to investors.During a Q&A session with press that followed, IASB Board Member Patrick Finnegan said:
In the process of setting standards on a global basis, in my view, one measurement attribute cannot have primacy over the other. If you measure using historical cost, others feel fair value is more useful; [you] shouldn't have to go hunting for it, it shouldn't be buried.FASB Chairman Robert Herz added the following significant observation about standard-setting, in response to a question raised in the press session by Michael Rapaport of http://www.wsj.com/:
In standard-setting, you never know where you're going til you get there; the process is important - you learn a lot of things.Finnegan concurred with Herz' observation later in the session.
In addition, Finnegan distinguished between the perception of volatility, and actual volatility, nothing: "Anything that creates the perception of volatility is unhelpful," but when it comes to actual volatility, those who argue to provide only historical cost information, "therein lies the flaw, if we suppress information in the financial statements, that we [could] somehow hold off [a financial crisis]."
Audit Firms and Convergence
Herz was asked by Francine McKenna of Re: The Auditors what he thought about the major audit firms' push for companies to move to IFRS, and how to respond to critics who may say, 'If the firms are for it [IFRS, etc.] then we probably should be against it."
I think the firms are genuine in their belief [of the value of convergence] but I think they kind of rushed it... and everyone said, 'here's another [Sarbanes-Oxley] 404.' I told some of the [audit firm] leaders that ultimately, [the goal is] high quality convergence, not just [convergence] for the sake of convergence."I'm sure Francine will include more details on this exchange in her blog, http://www.retheauditors.com/ , including her unique perspective on some other highlights from the conference.
LIFO and Convergence
Another key question raised during the general session with respect to convergence related to the fact that IFRS precludes LIFO, and at the same time, the IRS in the U.S. says that the same inventory valuation procedure must be used for book and tax; therefore, if U.S. co's were to move to IFRS, they would (i.e., if no further action were taken by the IASB or the IRS, and if the SEC were to permit or mandate a move to IFRS, or if private co's were to elect to adopt IFRS or IFRS for SMEs) presumably not be permitted to use LIFO for tax purposes any longer, if they could not use it for book purposes under IFRS.
Finnegan noted that at last week's SAC (IASB Standards Advisory Council) meeting, the issue was not raised when the SAC discussed post-2011 agenda issues.
Herz indicated the LIFO issue has come up in FASB discussions with the IRS. Specifically, he said:
We meet periodically with the IRS; they have catalogued a fairly lengthy list of things that would be handled [administratively or though legislation, relating to any potential move to IFRS]; other countries do have forms of tax deductions [related to investory], there may be other ways to skin that cat; [including] if they think of some kind of phase in.We will have other blog posts with highlights from day 1 (today) and day 2 (tomorrow) of FEI's CFRI conference. You can also follow us on twitter at www.twitter.com/feiblog, and read other's commentary on twitter posted using #feicfri.
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