As the financial crisis of U.S. is growing, fair value becomes the unprecedented concern problem. This crisis does not only shake the foundation of the financial executives in Wall Street, but also cause a fierce discussion between financial sector and accounting profession. Some executives claim that the metering mode of fair value enlarges the breadth and depth of the crisis, and emphasize that fair value is the main culprit of the crisis. They ask for suspending or repealing fair value accounting.
As the representatives of accounting, FASB (Financial Accounting Standards Board) and IASB (International Accounting Standards Board) accuse that financial sector attacks fair value accounting is to distract the public attention, so that they can hide their mistakes—the radical loaning policy and the failure of risk management.
Fair value should be what course to follow? Even if the financial sector and the accounting profession insist on opposite opinions, the fact is not going to change. Although fair value is not the main culprit of causing financial crisis, it adds fuel to the flame of the crisis. However, the imperfect standards of fair value should not be the reason to repeal it. The chairperson of IASB, pointed out, back to the historical cost accounting would not solve the problem of measurement of financial instruments. The priority is to identify the problems of fair value accounting, develop the recognition standards, the measurement methods and the disclosure requirements. After improvement, the new fair value accounting will be the mainstream of the measurement model in the 21st century.
Key words Financial crisis Fair value Measurement mode
