Fair Value to be Revised

Here is a very interesting report on the recent developments by the FASB on adjusting the Fair Value Principles to a less fundamentalist approach. Apparently the auditors have been requesting such support from the FASB because of the litigation risks. The most interesting part is that it actually accuses the Fair Value Principles of having worsened the crisis. "The market is always right" means that the market always has the correct price. But that doesn't imply that the market always has the correct valuation, does it? A simple detail overlooked by the FASB when developing the present Fair Value Accounting Rules. It is so easy to get regulation and legislation wrong especially when you do not start with the correct big picture.

I will soon return with comments on the Group of Thirty's report. The report shows a much better understanding of the basic market and human principles than the parents of the present legislation did. However I am in the pleasant position of being able to find shortcomings and that I intend to do.