The Financial Accounting Standard Board (FASB) worked on a conceptual framework (basically, theory) for financial reporting for decades and, in the process, changed the focus from historical cost (emphasizing the income statement--which gums up the balance sheet) to fair value (in theory, giving a better balance sheet presentation which changes the income statement perspective). This puts accounting theory more in line with economic theory, but creates immense problems. Fair value works with financial assets where a market value is market-based (e.g., New York Stock Exchange) or can be determined. Property, plant and equipment and other assets rely on historical cost; consequently, it's a hybrid system. Basically, both the balance sheet and income statement are distorted from any particular perspective.
The most critical point is the ability to manipulate numbers. A major reason historical cost was emphatically required at the end of the Great Depression was the massive frauds caused by market value manipulation, with utility pyramiding (Insull) a major player. Enron was a recent example of a company using fair value as part of a fraud scheme (in this case, violating generally accepted accounting principles). [Interesting, the basic accounting problems of Enron are still around for new frauds--derivatives, special purpose entities, and fair value). Apparently, history is not an important perspective for standard setting.
How does this work? Historical cost is based on acquisitions, the dollar amounts of which are reliable. Over time relevance becomes an issue (which, it seems to me, would be best solved by footnote information). The problem with fair value (where market value cannot be easily determined) is the ability to manipulate. Under typical employment contracts, executive have incentives to cheat on a massive basis. Bonuses and stock (options, restricted stock) depend on favorable earnings. The gray areas are vast. Techniques for manipulation can be delegated to the accountants. Business ethics seem flexible. Complexity can hide a multitude of sins: consider Enron or big banks--derivatives, special purpose vehicles, market value calculations. As demonstrated by Brill in Tailspin, shorttermism is rampant.