Well, to take a leaf out of a CPAs book, yes I do think that they shouldn't be recording the market value of the company on the company's books due to conservatism. That's why I like the pooling method.
For instance, what if Cisco starts marking an acquisition's assets to market value, including recording huge goodwill amounts on their balance sheet. The next thing you know you have $450 billion of assets. Then when the company falls out of favor on the stock market, you have a situation where on the books the company is worth $450 billion, but it's market cap decreases to, say, $200 billion. Should we then mark the assets back down to market for conservatism? If we start doing this, then I can see the costs for keeping track of all the market movements getting out of whack with the value they are providing shareholders or prospective investors.
My point is that for every "truth" that any accountant comes up with for improving the perceived quality of the books, others can come up with an opposite stance that is equal on its merits. The first thing to recognize is that there is no "truth", there is only perception. Perception is what drives these markets. So in a land of perception all we can do is come up with a GLOBAL set of standards that are uniform and adhered to by all. If some companies are smarter than others and learn how to manipulate those numbers, we should not create bandaids, because that leads to out of control systems. If everyone plays by the same rules then we have parity, and isn't that what we are really after? |
