Fair Value Measurement after Financial Crunch

Abstract

Fair value measurement became pervasive to financial reporting over last 20 years. Under fair value accounting, entities are obliged or permitted to measure particular assets and liabilities at their fair values as at the reporting dates. The opponents of fair value accounting insist on that financial reporting based on fair value measurement has accelerated the financial crisis and significantly worsened the impact on affected companies. The paper aim is to contribute to the actual debate whether fair value accounting played the role of a messenger or a mover in the recent financial crunch and subsequent economic recession and to analyse the characteristics of fair value accounting from the economic point of view, also to examine and depict the advantages and disadvantages connected to fair value, providing the reader with objective information and thorough insight into the problems and benefits of fair value. Partial objectives of this paper are to provide information about the evolution of fair value and are to examine and describe the possible future development of fair value.