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ACCOUNTING
PROBABLY NOT. BUT ENRON'S COLLAPSE MAKES CHANGES IN FINANCIAL REGULATION LIKELY. BY JOHN S. MCCLENAHEN
IN THE WAKE OF ENRON CORP.'S FINANCIAL collapse, U.S. generally accepted accounting principles (GAAP), like the energy trading company's executives and auditors, are under intense scrutiny.
The influential Economist magazine has gone so far as to suggest it's time to say good-bye to GAAP, the rules by which thousands of manufacturers and other American companies keep their books.
"The Enron scandal shows that America can no longer take the pre-eminence of its accounting for granted," intones a Jan. 19 Economist editorial. It urges the Financial Accounting Standards Board (FASB) and the U.S. Securities & Exchange Commission (SEC), which respectively write and police accounting rules, to re-examine traditional U.S. principles and possibly embrace international standards in their place.
For three reasons, however, such a radical shift in accounting is unlikely to occur anytime soon.
First, companies would be forced to scrap the historical cost basis by which they have figured their financials for the more difficult to determine "fair value"...