With great anticipation I was awaiting FASB Statement 159, "The Fair Value Option for Financial Assets and Financial Liabilities." I was a bit shocked by it when it came out. Two aspects really bothered me --one, that it is an option, and two, that to a great extent, it can be applied on an instrument-by-instrument basis. I will not go into a discussion of the standard, except for the narratives explaining the dissent of two members of the seven-member of the Financial Accounting Standards Board. Thomas Linsmeier dissents from its issuance because he believes a fair value option generally won’t result in financial reporting that achieves many of the expressed objectives for issuing FASB 159.

For example, he feels providing entities with an instrument-by-instrument option often will result in the reporting at fair value of only some instruments, and will not result in reporting more representative of entities’ economic exposure. He thinks FASB 159 will provide an opportunity for entities to report significantly less earnings volatility than they are exposed to. He also expresses the opinion that users’ costs will be increased in processing the information introduced by treatment alternatives that reduce the comparability of reported results within and across reporting entities and line items.

Donald Young goes even further, expressing the view in the description of his dissent that, “The provision of an option for fair value is likely to delay the adoption of consistent use of fair value measurement for financial instruments.” Also, he believes that FASB 159 introduces a fragmented approach to reporting financial instruments at fair value, instead of a conceptually coherent framework permitting the continued use of non-fair-value measurement of financial instruments that will result in financial statements that aren’t representationally faithful. He further believes that FASB 159 impairs consistency and comparability, which will reduce understandability of financial statements and increase complexity for users.

He says much more, including agreeing with his fellow FASB dissenting member that complexity and cost are shifted from the preparer to the user, with the user required to expend more cost and effort to compare financial statements prepared using the fair value option with financial statements prepared using a different measurement basis.

Don’t be misled by my title. I applaud and agree with these two dissents. What I am saying is that the other five board members voted for a standard that will benefit few, mostly some preparers, and hurt many of the users. What isn’t good is the fact that such a poor standard inspiring such well-reasoned dissents was approved. Like some Supreme Court decisions, such as Plessy vs. Ferguson (1896), the dissent opinion is destined to become the majority opinion in time. Just hope that it doesn’t take almost 60 years, as was the case for the first Justice Harlan’s dissenting opinion in Plessy vs. Ferguson.

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