Last week’s conversation was pretty interesting, wasn’t it? First, we took an initial glance at the dramatic differences between the GAAP approach and the IFRS approach to quantifying Fair Value.

Then? We took a second glance at those differences. And we couldn’t help but notice that those differences weren’t so dramatic after all! Although the standard setting bodies stake out different positions on a “general principle or rule” basis, they utilize their interpretive guidance to nudge accountants to converge on similar approaches.

That shouldn’t strike you as a stunning surprise. After all, the professional teams at FASB and the IFRS have been discussing the goal of convergence for many years. Their extensive conversations have inevitably moved the standards of the two organizations closer to each other.

What else did we learn last week? For starters, it’s always helpful to compare the American and international standards to glean a balanced perspective. Indeed, we should always read the text of the original standards very carefully, and not merely the professional summaries.

It’s also useful to review the interpretive guidance that is promulgated by the standard setting bodies. Finally, we can glean insights into the standards by applying our knowledge to recent sets of financial statements.

So where do we go from here? Next week, we’ll take a Grand Tour of the major balance sheet assets. Our textbook reviews this content in Chapter 4.

How shall we meet this challenge? After taking a brief quiz on the content that we discussed last week, we’ll review the textbook material for Chapter 4. Then, as an illustrative example, we’ll focus on a discussion of Goodwill, and we’ll utilize the most recent annual financial statements of Anadarko to apply our knowledge to a contemporary firm.

And how should you prepare for class? Please skim the entire chapter, and then read the section on Goodwill in detail. Afterwards, please review the relevant IFRS and FASB standards (and relevant interpretive guidance) that affect Goodwill. Finally, please review the Anadarko statements, and ask yourself how an investor would perceive Anadarko if it had utilized IFRS instead of GAAP.

Finally, please keep in mind that the fundamental purpose of the financial statements is to assist users who are endeavoring to estimate the value of the entity. Does GAAP accounting for Goodwill optimally help the user do so? Or does IFRS accounting?

We will continue to explore these themes throughout our course. By the time we conclude the semester, we’ll possess an extremely thorough “grounding” in the principle of enterprise value, and in the methods that are promulgated by GAAP and the IFRS to support this essential principle.

If you have any questions about this content as you navigate through it, please let me know. And by the way, if you have not yet sent me your Gmail address so that I can invite you to access your term project folder … now would be a very good time to do so!