The Tortoise, Achilles and
The protagonists of Lewis Carroll’s
famous paradox debate the merits
of fair value accounting.
FAIR VALUE ACCOUNTING IS HOT. Some
call it the best accounting approach since the invention of accrual accounting. Others consider it
the evil instigator of not only the current financial crisis
but also the earlier Enron and dot-com meltdowns. But
fair values, at least according to U.S. generally accepted
accounting principles (GAAP), have had to be disclosed
and used in many situations for several decades. Why is
it so controversial now?
Both the International Accounting Standards Board
(IASB) and the U.S. Financial Accounting Standards
Board (FASB) have concluded that fair values should be
applied to many classes of financial assets and financial
liabilities. Although recent discussions have centered
on the valuation of assets, certain concepts related to
fair value might also be applied to many of the liabilities
with which actuaries are involved (the measurement of
liabilities for insurance contracts, for instance).
With this in mind, I’ve imagined a possible conversation between the characters in D.R. Hofstadter’s 1980
Pulitzer-Prize winning book, Gödel, Escher, Bach: An
Eternal Golden Braid, whose theme was motivated in part
by Lewis Carroll’s What the Tortoise Said to Achilles.
Cont_2009_09_10_final.indd 62
8/14/09 2:11:42 PM
