About one-third or fewer companies plan to use the fair value option, FAS 159, in auditing complex financial data, according to a survey of CFOs and controllers by Grant Thornton LLP. That percentage drops to 28% when it comes to reporting the most complex and controversial products: derivatives. A bigger share (35%) of the 688 respondents intends to adopt the standard for evaluating liabilities; other financial instruments (32%); and equity-method investments (31%).
Companies want to avoid the potential for wild earnings swings so it's not surprising that the majority aren't using fair value, says Gary Illiano, partner-in-charge of international and domestic accounting at Grant Thornton. On the hand, says Illiano, "there are narrow circumstances when you get into complex valuations that require massive paperwork where FAS 159 makes sense."
Financial executives were polled during the turbulent period between Sept. 9 and Sept. 19, when Lehman Brothers and Merrill Lynch collapsed and concerns of an impending global meltdown surfaced. Other findings: 64% said they agree with the Financial Accounting Standards Board's (FASB's) definition of "discontinued operations" to include held-for-sale acquisitions and 58% said they support the FAS 5 change for contingent liabilities. Moreover, 85% indicated an interest in supplementing financial statements with nonfinancial measures that could provide relevant intangible values.
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