FASB - Comment Letter 12/10/07
RE: FASB Preliminary Views - Financial Instruments with Characteristics of Equity
FASB File No. 1550-100, published 11/30/07
Summary
The FASB's Liability and Equity Project's Preliminary Views report addresses fundamental issues of accounting. The important points are:
The culmination of a 22 year effort, results should be good. They are not.
A carve out exempts option compensation (p. 7, paragraph 28)
For full text, see: FASB Comment Letter 12/10/07
FASB release is available at http://www.fasb.org/draft/index.shtml
Pacioli's codfication of accounting rules was published in 1494, over 100 years before the first transferable, non-assessable, non-redeemable common stock and concommitant emergence of a public stock exhange. In Pacioli's time, book value and market value were one and the same (or accounting was in error). Today, stock's routinely trade at 2x - 3x book value. We argue accounting is overdue for modernization and that equity should be marked to market with transactions (buybacks, options) included in the financial section of the income statement.
"Good regulations make good sense. Bad regulations make crooks of us all."