The accounting standards setting group in the United States is known as the Financial Accounting Standards Board (FASB) and consists of seven board members who are appointed to five year terms. The most recent appointment was Thomas J. Linsmeier, and CFO.com has a pretty good interview with him on some of the issues currently facing the Board.

The issues he discusses are: the conceptual framework under­lying the principles of accounting, fair value accounting, and the complex topics of pension and lease accounting.

When you talk about historical cost and fair value, those two numbers are identical at an exchange trans­action date. Then the issue becomes whether or not you want to re-measure the trans­action price at a fair value in the future in the [accounting] model, or take the old trans­action price and allocate it over time to the income statement. The real open question when you make that trade-off is, how might investors best be served?

I previ­ously blogged about fair value accounting, when I talked about an article that was unreal­istic in its stated desire for the net assets of the balance sheet to represent the stock market value of the company. It’s important to note that fair value is cost on the date of the trans­action, and it’s only later on through use that the asset’s value is different from its cost less depreciation.

Our accounting model — and the standards in it — have been developed component by component. A weakness in the model is that we have not seriously considered the impli­ca­tions the separate accounting decisions have on aggre­gating financial reporting across line items. So a mixed-attribute model obviously causes challenges in that aggregation.

This is a weakness of all accounting models, whether its Canadian GAAP, US GAAP or Inter­na­tional Financial Reporting Standards (IFRS). I don’t really see any alter­native, giving the evolving nature of business transactions.

We could conceivably take every­thing we’ve done to this point and construct a simpler, unified set of principles, but it would inevitably end up convo­luted again as we would add more compo­nents to account for financial constructs the likes of which we can’t imagine at this point.

I don’t think it’s hopeless or not worth trying to achieve, but I’m skeptical it will stand the test of time.

Anyway, check out the interview if you’re inter­ested in the accounting profession in the US. Inter­esting that no mention is made of conver­gence with inter­na­tional standards, however.