American Accounting Association's Financial Accounting Standards Committee: Response to the FASB preliminary views: Reporting financial instruments and certain related assets and liabilities at fair value

The Financial Accounting Standards Committee of the American Accounting Association generally supports the FASB position that financial instruments be reported in the financial statements at fair value when the associated conceptual and measurement issues are resolved. A large body of research assesses whether fair value disclosures for financial instruments are "value-relevant" to investors. Although we know that the fair-value information is correlated with price, it cannot be known whether investors have processed this information "correctly," absent some independent valuation benchmark. The evidence indicates that fair values are correlated with security prices for those financial instruments for which fair values can be reliably measured. Perhaps the most important economic reason to prefer a current-value accounting system is that current values are more relevant to financial statement users for decision-making purposes than historical-cost numbers.