Bank One Corporation - Page 225

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               F.  Relevant Standards of the FASB                                     
                    1.  The FASB and GAAP                                             
               The Financial Accounting Standards Board (FASB) is the                 
          professional organization primarily responsible for establishing            
          financial reporting standards in the United States.  The FASB’s             
          standards are known as Generally Accepted Accounting Principles             
          (GAAP).                                                                     
                    2.  Initial Role of Market Values in GAAP                         
               Under GAAP, market values initially played a limited role in           
          shareholder reporting.  GAAP uses predominantly transaction-based           
          valuation; i.e., valuation established in an actual transaction             
          by the reporting entity.  The primary advantage of                          
          transaction-based valuation is reliability; accountants view                
          values established in arm’s-length transactions as less                     
          subjective and more easily verified than values produced without            
          such transactions.  The primary disadvantage of transaction-based           
          valuation is that values can become outdated, thus rendering the            
          information less relevant to investors.  If a company issued a              
          bond at par, for example, transaction-based valuation would                 
          report the bond on the company’s financial statements at its                
          issue price.  If interest rates fell, the market value of the               
          bond, and thus the market value of the company’s liability, would           
          rise.  This rise in value would not be recognized in the                    








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