The Spirit of Accounting

The Spirit of Accounting

Great news, good news, no news and mostly bad news

Here are four short essays about recent events.


We’re heartened by two February announcements. Specifically, the Financial Accounting Foundation announced that Dr. Christine Botosan of the University of Utah will succeed Dr. Tom Linsmeier as the Financial Accounting Standards Board’s academic member. Our buttons are busting because Paul M. was a longtime member of the Utah faculty and Paul B. earned his Ph.D there. In addition, we have often referenced Christine’s research that supports our Quality Financial Reporting premise that higher-quality information produces lower capital costs and higher security prices. We expect her to incorporate this idea in her own thinking and the board’s deliberations. Congratulations to her from both of us.

In addition, kudos to Jeff Thomson, CEO of the Institute of Management Accountants, who was recognized as one of 100 Top Thought Leaders in Trust by the “Trust Across America-Trust Around the World” organization. The IMA’s release quoted the TAA-TAW’s founder: “[Our honorees] inspire organizations to look more closely at their higher purpose, to create greater value for — and trust from — all of their stakeholders.”


In January, FASB released Accounting Standards Update 2016-01 that implements the market value method for marketable equity investments. Specifically, these assets will appear on balance sheets at market value with all realized and unrealized value changes reported on income statements. This update gets rid of the “Available for Sale” portfolio and the “Unrealized Gain or Loss” component of Accumulated Other Comprehensive Income, both of which were impossible to explain to students.

At last, FASB has created genuine accountability and comparability. However, it’s ironic that the Accounting Principles Board proposed this treatment in a 1973 exposure draft that died along with the board. The fact that the board took 43 years to get here casts a different light on this accomplishment.

Nonetheless, we hope FASB will soon apply this complete mark-to-market method to pension plan assets and debt security investments. The only objections will be politically motivated because all three portfolios are economically identical.


In the Sherlock Holmes story, “Silver Blaze,” the key clue that solves the mystery is the dog that didn’t bark, with a watchdog’s silence informing the eccentric sleuth that the culprit was an insider whose presence didn’t trigger an alarmed response from the animal.  Read more on Accounting Today.