3/17/2008: “CFA Says Fair Value Used As a Scapegoat

Excerpt from CFA Institute Centre for Financial Market Integrity Says Fair Value Being Used As a Scapegoat for Bad Decisions, Lack of Compliance

The CFA Institute Centre for Financial Market Integrity today reaffirmed its support for fair value as the most transparent measurement for investors to analyze financial statements. The CFA Institute Centre also said that fair value is being used as a scapegoat by corporations who have made poor decisions or were not in compliance with accounting standards.“Putting the blame on fair value for current market conditions is misguided,” said Georgene Palacky, director of the CFA Institute Centre’s financial reporting group. “Fair value is the most transparent method of measuring financial instruments, such as derivatives, and is widely favored by investors. Recent finger pointing seems merely an attempt to shift the focus from the real causes of the financial crises involving sub-prime lending practices and lack of market discipline. Indeed, fair value accounting and disclosures, which provide investors with information about market conditions as well as forward-looking analyses, does not create losses but rather reflects a firm’s present condition.”