The Securities and Exchange Commissions Advisory Committee on Improvements to Financial Reporting called for a judicious approach in expanding the use of fair-value accounting as part of 25 recommendations it unveiled Aug. 1 to improve the usefulness of financial information to investors and reduce the complexity of the financial reporting system.
Chaired by Robert C. Pozen, chairman of MFS Investment Management, the committees recommendation on measuring value includes urging more disclosure on what part of earnings are derived from historical cost accounting and what part comes from fair value measure.
The committee didnt try to resolve the debate between historical accounting and fair-value measure, Mr. Pozen said at a webcast briefing Aug. 1 with Christopher Cox, SEC chairman, unveiling a 172-page report containing the recommendations.
There are people strongly in favor of having everything in fair value and people who say we have gone to far in using fair value in accounting measures, Mr. Pozen said, noting the committee heard testimony from all sides on the issue at open meetings.
The committee advised the SEC to recommend the Financial Accounting Standards Board be judicious in expanding the use of fair-value accounting.