A RARE CONSENSUSIt surprised me, but for once I don't disagree with columnists Miller & Bahnson! Their article on purchase accounting (Feb. 26-March 18, 2007, page 12) is correct. Coming up with the fair value for the seller's assets and leaving the buyer's assets at historical cost provides only a mish-mash on the new combined balance sheet. Thus, their recommendations for "real basis" accounting, putting both buyer and seller on a full fair value basis, is theoretically sound. Also, it is actually possible to implement. If we can apply SFAS 141 to the seller, there is absolutely no reason why we cannot also apply it to the buyer at the time of a business combination.

So far, so good. The real problem would come in the next year and beyond. Many readers, including your columnists, would then want to have last year's fair values updated in each of the following years for changes in fair value over the previous 12 months.

There are three practical problems to what effectively would be full fair value accounting:

1. There are not enough appraisers in the world to revalue annually all the assets (and liabilities, for that matter) of all the companies in the United States that have participated in a prior business combination.

2. The fair values of assets, no matter how carefully developed, are still likely to be accurate to no more than 10 percent, plus or minus. For most companies, a 5 percent swing in asset values would swamp operating results, and a potential 10 percent swing would destroy the meaning of most profit and loss statements in terms of net income. The principles of valuation simply do not provide for greater precision.

3. Developing fair values ultimately relies on the professional judgment of the valuation specialist. You cannot escape from professional judgment. How are auditors going to audit judgment? They can check methodology and they can test assumptions, but they cannot audit my professional judgment. They can disagree with my judgment. How will a dispute in judgment ultimately be resolved? I have had numerous disagreements over valuation with audit firms and the Securities and Exchange Commission, not to mention in court and even with my own clients. At the end of the day, somebody has to make a decision. Who will be the ultimate arbiter?

Be careful what you ask for, Messrs. Bahnson and Miller. The assumed improved relevance of the fair value information you want to see will only be as good as the appraisal reports supporting those fair values. As one who has spent almost 40 years in the valuation profession, and has personally valued over $100 billion of assets, I can assure you that "fair values," while they are "fair" if developed impartially, are still susceptible to a fairly wide range, a range in excess of the underlying business performance of most business organizations.

These views are my own, and reflect only my personal opinion.

Alfred M. King

Vice chairman, Marshall & Stevens Inc.

Los Angeles


I read with significant interest the front-page article on diversity by Gail Perry ("The profession changes - but is it enough?" Feb. 26-Mar 18, 2007).

I am a 64-year-old Japanese-American and was only the second Asian CPA in Utah. When I completed my MBA, I began my accounting career with what was then Ernst & Ernst in Salt Lake City.

The second sentence of the article was the one that really caught my eye. It stated, "There probably isn't a woman or minority CPA in public accounting who can't recall an instance of clients expressing concern over non-white, non-males being assigned to their engagement - or even asking that women or other minority members of the team be replaced."

I am here to unequivocally state that there is, in fact, at least one minority (me) who can claim that he has never felt this type of discrimination in his entire career, which is now approaching its conclusion.

This is certainly not to state that it hasn't occurred to other people.

An important point made in the article is that, "If you allow yourself to be isolated, you're going to have problems." I believe that this is the challenge for everyone, including minorities. It is important to become an integral part of the team and work with all members of that team.

The article quotes statistics from a Howard University School of Business Center for Accounting Education survey conducted in the fall of 2005, and a similar survey conducted by the National Association of Black Accountants. The article states that, "Approximately one-third of respondents in both surveys stated that they have found that white colleagues with less technical competence or experience than themselves have been given more high-profile or challenging job assignments, and more than half of the NABA survey respondents believe that they have received biased evaluations from supervisors because of their race."

If one-third of the respondents replied that this was a problem, it must mean that two thirds state that it was not a problem. I'm a member of that two-thirds majority.

I have spent the past 30-plus years in the academic community. I can say without hesitation that, in my academic career, I have never felt the discrimination mentioned in Gail Perry's article. I'm not arguing that the conditions that Ms. Perry discusses do not happen. I am just going on record that there is at least one person who is winding up his career and did not experience any of the problems that she mentions.

What I believe we need is not tolerance, but total and complete acceptance. When I was in high school, my student body president was an outstanding individual named Jim Sandoval. Jim is now a successful dentist in Phoenix. At our 30-year high school reunion, someone mentioned that Jim was Hispanic. I turned to my wife, who is from Southern California, and asked, "Is Sandoval a Mexican name?" Incredulous, she said, "Of course it is!"

I was shocked, because in all the time that I had known Jim - and we are still good friends - it had never occurred to me that he was Mexican. Then it occurred to me that it had probably never occurred to him that I'm Japanese.

I have a good friend whom I have known since we were in the second grade. He and I are now on the accounting faculty together at Weber State University in Ogden, Utah. One day, not long ago, I said something about myself being Japanese. He said, "That sounds so funny for you to say that, because I have never even thought of you as Japanese."

If all of us could view each other as Jim Sandoval and I do, and if everyone could accept each other, articles such as Ms. Perry's would never have to be written.

Ron Mano

Accounting Department chair and

Eccles Accounting Fellow, Weber State University

Ogden, Utah

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