Financial Accounting Standard No. 157 (FASB 2006) specified three unrelated valuation methods (mark-to-market, mark-to-model, and mark-to-judgment) to be used in different circumstances and declared their combination to be "fair." Note that the last of these three options allows firms to value assets as they deem fit when market values or model parameters cannot be objectively estimated. Warren Buffet pointed out that the third level of "fair" risks becoming mark-to-myth.4 In mid-October 2008, in response to political pressures, the IASB (2008) proposed to allow special dispensation for application of fair values to financial instruments.5 In what sense can this proposal be called a principle, and not the beginning of the slide down the proverbial slippery slope of clarifications and guidance that land the general principles in a morass of complex rules under pressure from money and power?
The nature of written standards depends not only on intent but even more so on the process of writing them. A key feature in the process of standard writing ? consideration of business and politics ? will be the same, whether the FASB or the IASB does the writing. It is unreasonable to expect that the IFRS, after having tumbled through uiis process over a few financial scandals and cycles of the world economy during the next couple of decades, will look any different than the FAS looks now, the rhetoric about rules versus principles notwithstanding. It would be helpful to know the substance of the distinction between rules and principles in the context of what the FASB and the IASB have done in the past and plan to do in the future.