The absence of a clear standard of judgment has been the source of trouble in everything from personal ethics to land ownership. And yet many accounting theorists, including Richard Breeden, chairman of the Securities and Exchange Commission, want to visit this chaos on American corporations. It goes by the name of current value accounting.

Most companies' balance sheets now reckon assets and liabilities according to their value at the time of acquisition, less depreciation. Current value accounting would list them at that moment's market price. That sounds reasonable -- but is in fact dangerous.

The most important assets in any corporation today are intellectual assets, although the accountants of the industrial society rarely put them on the balance sheet. These assets may be imbedded in a silicon chip, a manual, a compact disk, a jig or pattern, or may be walking around the office.

Intellectual assets are hard to measure, and sometimes, like software, are mostly expensed, not capitalized. Everyone knows that all the lights would go out, all the airplanes would stop flying and every modern factory in the world would cease functioning if their software disappeared. And yet, this driver of modern society does not even appear as an asset in any substantial way on the corporate balance sheets of the world.

The argument about how to value physical assets is, therefore, in a sense another case of generals fighting the last war. Debate rages as how to measure the current value of physical assets and financial liabilities. Some want to determine "current value" through the use of experts when no public market exists -- thus furnishing full employment for the "experts" and fodder for the plaintiff's bar.

Others want to use a discounted cash flow method, with some expert naming the discount rate. As Philip Rowley, an executive at U.S. Bankcorp has pointed out: "There are many methods of discounting values, and all of them are subjective." Others want to use realizable value. Since the value of some securities -- even government bonds -- can swing as much as 100% in one year, a snapshot in time is of little value. In any event, market value figures appear now in the footnotes and are ignored by bank analysts, since all they show is the liquidation value of a company at one moment in time.

Some accounting philosophers want to mark a bank's investment portfolio to market each day in the same way banks currently value their trading accounts. But since the bonds in the investment account were bought for the long term to be held to maturity, no management purpose would be served by moving their recorded value up and down as interest rates change. Booking such movements would put reported earnings on a roller coaster ride although the earnings from the business are unchanged.

Assuming the credit of the borrower is good, the bonds will be paid at maturity. So not only is there no useful purpose served in marking investment securities to market, a false picture would be presented, as asset values moved up and down with no real effect on the business. Quite the reverse is true of a trading account, where it is anticipated that securities or currencies are bought to be traded, and therefore the market value of currently held trading account securities is not only relevant, but vital.

In the case of marketable securities, a value can be established if the market is broad and deep enough to be meaningful. A quoted market without liquidity, on the other hand, is not a reliable guide to value. The situation gets worse when there is no market. Indeed in the case of bank loans, distortion would replace clarity. On March 2, Federal Deposit Insurance Corp. Chairman William Taylor pointed out the obvious fact that, "the function of depository institutions in the intermediation process is, in great part, to develop lending and deposit relationships that organized markets cannot support."

Mr. Taylor went on to make the point that if some assets were marked to market, ". . . a corresponding amount of liabilities also should be subject to the same treatment." Similarly, Secretary of the Treasury Nicholas Brady joined Mr. Taylor and Federal Reserve Chairman Alan Greenspan on March 24, and pointed out that current value accounting "could have serious unintended effects on the availability of credit as well as on the stability of the financial system."

Consistency of accounting treatment is always more useful to managers and investors than the latest fad of accounting afficionados. Actually, the current-value fad is not so recent. In the middle of the New York City financial crisis of the 1970s, the Financial Standards Accounting Board proposed writing bank investment securities to market. "Experts" opined that New York City bonds would default and that the paper was worthless. (In fact, all the bonds were paid.)

Public hearings were held. Suddenly, mayors and governors realized that if banks were forced to write long-term investments up and down, with consequent up and down effects on earnings, the bonds that finance their cities and states could not be sold to banks. And banks were the principal buyers of these securities. The idea was withdrawn.

Current value accounting was a bad idea then. It is a bad idea today. It is kept alive, not by the sellers of bonds, who understand its real-world consequences; not by the managers of businesses, who know that it would distort earnings without telling them anything they need to know; and not by investors, whose buy and sell orders put a value on the stock of every listed corporation every day. It is kept alive only by theoreticians in the accounting profession.