The crisis of fair value accounting: making sense of the recent debate

  • The recent financial crisis has led to a vigorous debate about the pros and cons of fair-value accounting (FVA). This debate presents a major challenge for FVA going forward and standard setters’ push to extend FVA into other areas. In this article, we highlight four important issues as an attempt to make sense of the debate. First, much of the controversy results from confusion about what is new and different about FVA. Second, while there are legitimate concerns about marking to market (or pure FVA) in times of financial crisis, it is less clear that these problems apply to FVA as stipulated by the accounting standards, be it IFRS or U.S. GAAP. Third, historical cost accounting (HCA) is unlikely to be the remedy. There are a number of concerns about HCA as well and these problems could be larger than those with FVA. Fourth, although it is difficult to fault the FVA standards per se, implementation issues are a potential concern, especially with respect to litigation. Finally, we identify several avenues for future research. JEL Classification: G14, G15, G30, K22, M41, M42

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Metadaten
Author:Christian LauxORCiDGND, Christian LeuzORCiDGND
URN:urn:nbn:de:hebis:30-65780
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2009,09
Series (Serial Number):CFS working paper series (2009, 09)
Document Type:Working Paper
Language:English
Year of Completion:2009
Year of first Publication:2009
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2009/04/30
Tag:Banks; Fair value accounting; Financial crisis; Financial institutions; Liquidity; Mark-to-Market; Procyclicality
GND Keyword:Fair-Value-Bewertung
HeBIS-PPN:213873109
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht