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
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: 13Accepted Paper Series
Date posted: March 6, 2011
© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo3 in 0.640 seconds