In our prior column, we began to explain the importance of having Rule 203 exceptions, both as a matter of quality control and as a portal to progress for managers who realize that generally accepted accounting principles aren't good enough.We also strongly criticized the Financial Accounting Standards Board for proposing to eliminate 203 exceptions in its recent exposure draft on the GAAP hierarchy, on the basis that if a rule is generally accepted, it automatically must produce relevant and reliable information. Frankly, we don't think that the board could be more wrong, both in eliminating 203 exceptions and in their claim that GAAP is not merely good, but dang near perfect.

In contrast, we see Rule 203 exceptions as extremely important safety valves for avoiding situations in which financial reporting emphasizes form over substance. Certainly, the pursuit of useful reporting must trump blind compliance with politically derived rules.

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