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FAIR VALUE AND ITS DISCONTENTS

Remarks byCurtis R. Kimball, CFA, ASA

CFA Society of AtlantaMay 13, 2009

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FAIR VALUE AND ITS DISCONTENTS

PREFACE The observations contained herein represent the personal opinions of the presenter and not the positions of his firm, his colleagues, nor the professional societies with which he is affiliated.

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FAIR VALUE AND ITS DISCONTENTS

CONCEPTUAL ISSUES WITH FAIR VALUE-BASED FINANCIAL REPORTING

• Unit of account• Premise of value

– Going concern– Liquidation– Highest and best use– Most advantageous market

• Fair Value Hierarchy– Level 1: What is an active market– Level 2: How reliable are observable inputs– Level 3: Are entity-specific assumptions biased

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FAIR VALUE AND ITS DISCONTENTS

IMPLEMENTATION ISSUES WITH FAIR VALUE-BASED FINANCIAL REPORTING

• Consistency from period to period• Consistency from reviewer to reviewer• Reconciling the public market capitalization

to the summed-up values of the business reporting units

• Fair Value in financial reporting conflicts with other value-reporting analysis

• Litigation risk in Fair Value accounting

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FAIR VALUE AND ITS DISCONTENTS

WHAT IS TO BE DONE?

QUESTIONS & (MAYBE SOME) ANSWERS