Comment Letter on the Special Report by Wayne S. Upton, Jr.

FASB is to be commended for its open-minded and bold consideration and exposure of ideas that are at variance with the traditional accounting model so long used, developed, extended and defended by FASB.

One of the paradigms exposed or referred to in the Special Report* was the draft proposal Accounting For The Future (AFTF) by Humphrey Nash (myself).  AFTF is the title of the monograph and also the term used to refer to the accounting model proposed by the draft proposal.  However the name AFTF was a convenience and confers no special ownership of the ideas presented.  I make this point because most of the ideas gathered within the monograph are ideas currently existing and in use in the accounting or financial communities.

The proposed model is also well aligned with both the history and goals of the AICPA (read, for example, Council Member Harvey Kapnick’s provocative 1976 essay on Value-Based Accounting or the AICPA’s pivotal 1998 CPA Vision Statement).  Almost without exception, the basic concepts and principals of AFTF are those of the current accounting model.  AFTF continues the traditional role and functions of accounting and accountants.  In particular, AFTF preserves the traditional bookkeeping, auditing and financial reporting functions; indeed AFTF depends vitally on those functions.  AFTF conveniently measures total value, including intangibles, in familiar financial terms.

Many of the AFTF structures and technologies are those familiar to practicing accountants.  For example, AFTF adopts the technology of present values.  This technology is at least 100 years old and has been given substantial exposure by FASB within an accounting setting.  This technology gives rise naturally to the value and value-added concepts proposed by AFTF.  The decision perspective of AFTF depends on cost/benefit analysis techniques in common use by accountants.  The "historic cost of capital", which arises from the "dual validation procedure", is simply the intrinsic rate familiar to many accountants.  Even the use of capital market information is familiar to accountants involved in accounting for business combinations.

AFTF proposes a seemingly radical shift from a retrospective cost-based accounting model to a prospective value-based model.  This is an illusion.  Many aspects of the current accounting model are prospective and many aspects of AFTF are retrospective.  The current GAAP model has many implementations that are value oriented: AFTF depends strongly on cash flows, including costs.

I believe that AFTF or something similar, once it is understood, will become the accounting model of choice because it uses modern technologies to meet modern needs while preserving the historic strengths of traditional accounting.

I wish to thank FASB for encouraging me to develop and submit "my" ideas.  Without that encouragement, I would not have started the draft proposal.

* See Chapter 2-New Reporting Paradigm, page 24 of the Special Report: Business and Financial Reporting, Challenges from the New Economy, by Wayne S. Upton, Jr. Financial Accounting Series No. 219-A, April 2001 This publication is available on the FASB website at, http://accounting.rutgers.edu/raw/fasb/