The FASB proposal on inventory might make sense, but I do not think the proposal on extraordinary items does.
The information on extraordinary items has value no matter how you define extraordinary items.
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Does this make sense? It is as difficult to define extraordinary items as it is to define a capital lease (vs. operating lease). In both cases the definition under FASB is ARBITRARY. However, the definition of capital lease LOOKS more complete in some sense because it is expressed in language that is seemingly more "scientific". By the logic of FASB, shouldn't we relieve the pteparers of the burden of estimating useful lives, appropriate interest rate, and whether there is a "bargain" price option by mandating that all leases are treated as operating leases (or capital leases)? Aren't we on a slippery slope to a regime where no disclosures beyond trial balances are really necessary? Further, is it at all necessary to have any disclosures beyond those mandated by the present judicial system?
Since when the "burden" of classifying events become a criterion for financial disclosures? Isn't the burden of valuation of derivatives or credit default swaps at least as onerous as the burden of classifying an event as extraordinary?
I think we are better off with the judicial system determining GAAP.
The information on extraordinary items has value no matter how you define extraordinary items.
____________________
FASB
believes eliminating the concept would relieve preparers from the
burden of assessing whether events or transactions are extraordinary.
____________________Does this make sense? It is as difficult to define extraordinary items as it is to define a capital lease (vs. operating lease). In both cases the definition under FASB is ARBITRARY. However, the definition of capital lease LOOKS more complete in some sense because it is expressed in language that is seemingly more "scientific". By the logic of FASB, shouldn't we relieve the pteparers of the burden of estimating useful lives, appropriate interest rate, and whether there is a "bargain" price option by mandating that all leases are treated as operating leases (or capital leases)? Aren't we on a slippery slope to a regime where no disclosures beyond trial balances are really necessary? Further, is it at all necessary to have any disclosures beyond those mandated by the present judicial system?
Since when the "burden" of classifying events become a criterion for financial disclosures? Isn't the burden of valuation of derivatives or credit default swaps at least as onerous as the burden of classifying an event as extraordinary?
I think we are better off with the judicial system determining GAAP.
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