The financial services industry is the most vocal critic of the application of fair value techniques. It appears that they'd like more choice in how they value certain financial assets (especially those with significant market prices declines?). Apparently, the best option according to some in the industry is a "mixed attributes model" that allows the choice between fair value (as in market price) and historical cost (see for example the amusingly titled "Bankers: Fair value is like throwing gasoline on a fire".)
Note that the SEC and FASB made an announcement on Sept. 30th aimed at clarifying the implementation of fair value accounting (the full press release can be found here):
"When an active market for a security does not exist, the use of management estimates that incorporate current market participant expectations of future cash flows, and include appropriate risk premiums, is acceptable."Funnily enough, this treatment of estimating fair value is allowed under SFAS 157, specifically under the use of 'mark to model' accounting. At least in theory, it would be very easy to calibrate a present value model that was equal to the historical cost of the asset. Doing so though, of course raises the criticism that instead of marking to model, they are "marking to make believe." Warren Buffet was quoted (the rest of the article can be found here) as saying “The recent meltdown in much of the debt market, moreover, has transformed this [mark-to-model] process into marking to myth…Indeed, for a few institutions, the difference in valuations is the difference between what purports to be robust health and insolvency.”
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