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Your issue of May 2008 may well stand among
the best journalism in our profession, with not only
the codification of GAAP (“Framing
the Future,” page 40) but a thorough
discussion of the late crisis in the subprime
mortgage market and the role of accounting there
(“The
Role of Fair Value Accounting in the Subprime
Mortgage Meltdown,” page 34). Michael
R. Young is right on point that the conservative
standards of reporting have brought the valuation
issue to immediate attention. That is what
reconciles both Paul B.W. Miller’s (conservative)
fair value accounting of the balance sheet to Eugene
H. Flegm’s historical (and inclusive) income
statement. The difference, “unrecognized losses”
after income from operations, maintains the
integrity of both the income statement and the
balance sheet. Some competence on the part of the
user is necessary to understand this; it simply
cannot be “dumbed down” any further. But,
the real issue is brought out quite clearly by
Kenneth F. Fick (“Securitized
Profits,” page 54) in his final paragraph: FASB
will likely “address the removal” of
“special-purpose entities.” Enron immediately comes
to mind. “Special-purpose entities” are forms to
move substance off the balance sheet. SPEs are
subsidiaries or related parties which must be
included and reported on the balance sheet in the
classical manner. When do we learn? Thank
you again for a superb issue, and I look forward to
more of the same.
Samuel H. Coppock, CPA
Chandler, Ariz. | 
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