Anyone who has read a newspaper or watched the evening news in recent years is well aware that fraudulent financial reporting by big businesses has reached alarming levels. Equally startling is the frequency of fraudulent financial reporting by small businesses—as many bankers and government agencies will confirm—and even by non–business entities such as not-for- profit organizations.
Fair value accounting is the accounting profession’s equivalent of the automobile commercials you have seen on television, showing a vehicle racing around an obstacle course or bouncing over hills, along with a dis- claimer saying something to the effect that “This is a professional stunt driver on a closed course. Do not try this at home!” Fair value accounting is not for the timid. It i…