Another View

The letter, “A Historical Look at Standards” ( JofA, Oct.00, page 16) , supports retention of the “traditional theory of matching costs with related revenues, using an historic cost basis” and rejection of a “fair-value-based, balance-sheet-oriented system.” It implies that a continuing focus on matching costs might have prevented some cases of “managed earnings.”

That implication is not supported by analysis of instances of managed earnings. The common characteristic of such cases is that the matching controls have been violated. Those controls derive from the balance sheet, quite apart from whether measurement should be based on historic cost or fair value.

Oscar S. Gellein
Golden, Colorado