Until 1991, the accounting profession was largely guided by historical cost, transaction-based accounting.Granted, fair market value and historical cost at the point of the transaction were deemed equivalent, provided that arm’s-length transactions were involved. However, those making decisions — investors, auditors and regulators — grasped that unless someone gave and accepted consideration for something, its underlying value was arguable.

When all of those familiar with the traditional accounting framework that served economic spheres well through centuries were asked about alternatives, they clamored that fair market value information would be useful in addition to (not instead of) historical cost.

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