Valuation Standards

In an August 14th story in Compliance Week entitled, “More Sparring Over Fair Standards for Valuation,” by Tammy Whitehouse, the reporter covers the issue of increased importance of Sarbanes Oxley rules and valuation guidelines. Northeastern University's professor of Accounting David Sherman expresses his thoughts on the accounting practice of valuation. “If you think about what people hoped for from Sarbanes-Oxley, fair value accounting has provided more room to manage earnings than we’ve ever had before,” said Professor Sherman. “There is less opportunity to game the values if you determine fair value with empirical data and market transaction data. As people move toward more empirical data and [have] less reliance on models, we’re going to see fewer disputes about what the fair value is. True market data has a wonderful way of resolving disputes.”