Debate on Fair Value Accounting versus Principles and Rules-Based Accounting
In the aftermath of the global financial crisis of 2008, the role of fair value accounting in the crisis has been debated. Most analysts have argued that the use of fair value accounting by financial institutions exacerbated the occurrence of the financial crisis(Schmidt, 2014). On November 13, 2008, the American Banking Association wrote a letter to the Financial Accounting Standards Board concerning the issue. In the letter, the association noted that fair value accounting results in recognizing greater than the actual credit losses. It also results in the recognition of losses on financial instruments that do not have Continue reading...