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Fair Value Accounting in Crisis

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Submitted By MalikaK
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Fair value accounting and financial stability

The recent financial crisis gave boost for intense policy discussion over fair value accounting among US Congress, the European Commission, and banking and accounting regulators all over the world. Critics state that fair value accounting had significant impact on the financial crisis and over exaggerated its force for financial institutions around the world. On the other hand, there those who oppose that fair value accounting was just a measurement tool of measuring assets. Currently both Financial Accounting Standard Board (FASB) and International Accounting Standard Board (IASB) escalated their efforts towards establishment of a single source of guidance for all fair value measurements and clarification of the definition of fair value and related guidance. The IASB is aiming to complete all phases of replacement of IAS 39 Financial Instruments: Recognition and Measurement by IFRS 9 Financial Instruments by 30 June 2011, which would apply to financial statements for annual periods beginning on or after 1 January 2013.
In this essay I will provide different opinions for fair value accounting and whether those arguments give potential for further research. First, the essay will provide genesis of fair value accounting and reviews researches dedicated to this issue. Second, the paper will comment on FVA role in the financial crisis and its contribution to it. Third, the essay will analyze historical cost accounting and show that it is not the way of solving the issues of FVA. Forth, the paper will show efforts of global accounting regulators towards solving the issues raised by fair value accounting. And finally I will raise the prospect issues that could be brought forward for further

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