Abstract

http://ssrn.com/abstract=1775141
 
 

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Financial Reporting and Financial Crises: The Case for Measuring Financial Instruments at Fair Value in the Financial Statements


Thomas J. Linsmeier


Financial Accounting Standards Board

December 1, 2010

Accounting Horizons, Forthcoming

Abstract:     
Financial Accounting Standards Board (FASB) (2010) proposes that all financial instruments be measured at fair value in the financial statements. This commentary provides one Board member’s reasoning for supporting this proposal, which is based on (1) evidence that the amortized cost model failed to provide timely information about the deteriorating financial condition of failed banks in the current financial crisis, (2) lessons learned from prior financial crises affecting financial institutions in the United States and Japan, and (3) research evidence indicating that fair value measures are most highly correlated with bank’s exposures to interest rate and credit risk – two key risk exposures that have lead to bank failures in the three most recent financial crises.

Number of Pages in PDF File: 13

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Date posted: March 6, 2011  

Suggested Citation

Linsmeier, Thomas J., Financial Reporting and Financial Crises: The Case for Measuring Financial Instruments at Fair Value in the Financial Statements (December 1, 2010). Accounting Horizons, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1775141

Contact Information

Thomas J. Linsmeier (Contact Author)
Financial Accounting Standards Board ( email )
401 Merritt 7
P.O. Box 5116
Norwalk, CT 06856-5116
United States
203-956-5208 (Phone)
203-847-6030 (Fax)
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