Two years ago, we criticized the Financial Accounting Standards Board for publishing an exposure draft that proposed doing away with the Rule 203 exceptions that permit, and even encourage, departures from generally accepted accounting principles when compliance would produce misleading financial statements. Underlying this proposed action was a presumption that compliance with published GAAP always leads to relevant and reliable information. Back then we prepared a series of columns describing the intolerable flaws in this premise.The first two focused on how essential it is to allow Rule 203 exceptions to foster innovations when the old ways can no longer be considered adequate.

The next two explained why published GAAP cannot fulfill the role that the board members were ascribing to it. In particular, much of GAAP is really PEAP (Politically Expedient Accounting Principles), because it is shaped by pressures and compromises. We also described how much of GAAP is WYWAP (Whatever You Want Accounting Principles) because it embraces divergent alternatives, such as FIFO and LIFO. Comparability cannot possibly be achieved with this much diversity, and, without comparability, the information cannot be useful.

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