In an earlier post, Musings on Mark-To-Market, I talked about the problems of this accounting rule in the current economic crisis.

RichardH commented that valuing assets is more of an art than a science.

I know this is anathema to accountants, but perhaps a company ought to be able to say, “We don’t know what our assets are worth”.  In this environment, that is probably a truer statement than putting almost any kind of misleading number on it.

Other possibilities would be to allow companies to state a range.  They might be able to say to their creditors, “if you make me sell all my assets today they are worth $100, but if you let me sell them over time and after the economy recovers they are worth $1,000.”

I remember a discussion with an ex-boss of mine who asked me to tell him how long a software-development project would take.  He then asked me if I was 95% certain about this number. I could not honestly tell him that I was.  After berating my poor abilities to manage a software project after my 40 years of experience, he asked me again how sure I was.  I told him I was 95% sure.  He then proceeded to ask me that if I was not 95% certain 5 minutes ago, how could I be so certain now?  I told him that I was just trying to give him the answer that he wanted to hear. I guess I should have waited more than 5 minutes to change my answer.

RichardH’s comment on the earlier post indicates that he has similar stories to tell from his world.

I’ll have to ask my daughter, the accountant, if there is any parallel between my experience and that of the accounting world.