Case 7-2 The Use of Current Value The argument among accountants and financial statement users for tax purposes, using current values can cause earnings vol- over the proper valuation procedures for assets and liabilities atility, and management could use current value to "manage resulted in the release of SFAS No. 115 (sec FASB ASC 320 earnings." 19). The statement requires current-value disclosures for all Required: investments in debt securities and for investments in equity securities that have readily determinable fair values and for a. Determine how current values might be determined for which the investor does not have significant influence. The investments, land, buildings, equipment, patents, copyrights, chairman of the Securities and Exchange Commission termed trademarks, and franchises. historical cost valuations "once-upon-a-time accounting." His-b. How might the use of current values in the accounting torical cost accounting also has been criticized as contributing records cause earnings volatility? to the savings and loan crisis of the 1980s. During that period, c. Discuss how management might manage carmnings using these financial institutions continued to value assets at historical current cost data. cost when they were billions of dollars overvalued. Critics of d. How do the requirements originally established by SFAS current-value accounting point out that objective market values No. 157 affect the use of fair value measurement in financial for many assets are not available, current values cannot be used statements