A review of "fair value" accounting promises to be a long, painful procedure that not only carries with it the possibility of severe and potentially deadly infection, but entails a long recovery time and is likely to reveal any number of other tumors and growths that threaten to be a bigger deal than the original concern.
Accounting pathologists that we are, our attention has been rapt.
Take a seat in the visitors observation lounge. We're going in.
What the hell is it?
FAS 157 "defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements." In other words, it tells you how to count. When to count. What to count. When to recount. And when to count down to zero.
Occasionally, authorities (and those lacking any authority in the topic at all) can be seen pointing suspiciously accusing fingers at FAS 157 with an eye towards blaming the rule for the many ills that presently plague the financial system. If it wasn't for FAS 157, the argument goes, banks wouldn't have to admit that the assets on their books were actually either worth next to nothing, or were impossible to trade and therefore were actually worth something like nothing at all.
Of course, the mistake here is in assuming that simply not disclosing that the bank is insolvent keeps it from being insolvent.