The Integration of Fair Value Accounting into U.S. GAAP: 1975-1995

This article focuses on the evolution of U.S. GAAP from an almost exclusive use of the “historical cost basis” to the gradual incorporation of the “fair value concept” into current accounting standards. Specifically, this ideological shift has occurred over a protracted period of almost forty years and includes financial reporting standards for leases, pension plans, investments in debt and equity securities, derivatives, business combinations, executive stock options, and employee stock ownership plans (ESOP). Because this path began much earlier than most people realize, it is readily apparent that this valuation shift is not solely a result of the recent regulatory efforts to converge U.S. GAAP and IFRS. This article specifically addresses the changes that occurred between 1975 and 1995