The more we consider what the Financial Accounting Standards Board accomplished with SFAS 159, the more we're warming up to the sea change it represents. This standard, titled "The Fair Value Option for Financial Assets and Financial Liabilities," permits without requiring managers to account for financial assets and liabilities using their fair values, with unrealized gains and losses flowing through the income statement. Some have disparaged SFAS 159 for not mandating full fair-value reporting, while others have criticized its "optionality."We see it quite differently. For years we have endorsed the Quality Financial Reporting paradigm that calls managers to step out on their own and try to meet the needs of the capital markets for useful information. In effect, SFAS 159 provides a nudge in this direction by allowing, even encouraging, innovative managers to jump into QFR by applying fair value without waiting for everyone else to get into the pool. We've often said that the biggest rewards will go to those who start providing better financial statements, so we're gratified that FASB seems to have seen it our way.

The topic for this column is the equity method, which we subjected to blistering criticism a few years ago for its abject failure to produce results that help statement users project future cash flows. Now that management can actually toss the equity method overboard, we thought it would be good to reprise our thoughts from April 2001 and perhaps stimulate some to take the plunge.

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