The Impact of the Accounting Profession's Movement toward Fair Value Reporting in Financial Statements: An Interview with Theresa Ahlstrom, Long Island Office Managing Partner, KPMG LLP
Casabona, Patrick A., Review of Business
KPMG LLP, the audit, tax and advisory firm, turns knowledge into value for the benefit of its clients, people, communities and the capital markets. Its professionals work together to provide clients access to global support, industry insights, and a multidisciplinary range of services. KPMG LLP (www.us.kpmg.com) is the U.S. member firm of KPMG International. In 1993, KPMG International was the first multidisciplinary professional services organization to establish itself along industry-specific lines of business. This enabled KPMG to tailor services and strategies to the needs of clients across a range of global industry markets. KPMG International's member firms have 103,000 professionals, including 6,700 partners, in 144 countries.
Theresa P. Ahlstrom is KPMG's Long Island Office Managing Partner and the Northeast Audit Quality Support Partner, supporting the Northeast Audit Area Risk Management Partner, and playing a key role in the development and execution of the area's quality enhancement initiatives. She started her career at KPMG, LLP, in 1982 as a pre-professional in the firm's National Department of Professional Practice (DPP), and joined the audit professional staff of the Long Island office in 1983. In 1993, after a two-year rotation in DPP and the Office of General Counsel, she was admitted into the partnership.
Ms. Ahlstrom has served as lead engagement partner for numerous clients in the healthcare, biotech, consumer and industrial market, and non-profit industries. Because of her technical experience and client service record, she was designated an SEC Reviewing Partner, Professional Practice Partner, Employee Benefit Resource Partner, Primary Campus Recruiter, and National Training Instructor.
Graduating summa cum laude with a B.S. degree in accounting from St. John's University in 1983, she was inducted into the YWCA Academy of Women Achievers in 1998 and the Long Island's Top 50 Women Hall of Fame in 2000, 2001 and 2003. Ms. Ahlstrom is also very active in numerous community activities and professional associations, and received the 2003 Long Island Fund for Women and Girls Achievers Award. She resides in South Huntington, New York, with her husband Bob and their two young sons.
Q: How do you think fair value affects the reliability and relevancy of the financial statements?
A: There have been grumbles within Corporate America for well over a decade that financial statements are irrelevant to financial analysts, in light of the current techniques analysts use to value the health and projected financial performance of an entity. The objective of fair value accounting, on the other hand, provides users of financial statements with a clearer picture of the current economic state of a company, making a company's financial statements more useful or "relevant" in the marketplace. Clearly, historical cost accounting, while perhaps easier to follow and "bookkeep," has seen its day and more than outlived its usefulness. So I think most preparers and users of financial statements are sold on the enhanced relevancy point. However, I am not convinced on the topic of reliability of financial reporting using more fair value accounting methods. The increased subjectivity and estimation process that underpins all aspects of fair value accounting calls the "reliability" of such information into question for me. Having said that, I do believe that fair value has a far better chance of providing more reliable information in most cases than the old historical cost model.
Look at the last four Statements on Financial Accounting Standards (SFAS) issued by the Financial Accounting Standards Board (FASB), which all require some form of fair value reporting (i. e., SFAS 155, Accounting for Certain Hybrid Financial Instruments, SFAS 156, Accounting for Servicing of Financial Assets, SFAS 157, Fair Value Measurements, and SFAS 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. …