ABSTRACT
Accounting standards have been made responsible for deepening the financial crisis because of their pro-cyclical character. Recently introduced “Mark-tomarket” or “Fair Value Accounting” (FVA) methods are far more open to market fluctuations than the traditional accounting standards that were based on historic costs. Since financial assets have been more profitable than production assets during recent decades (and their market values thus have developed much better), this has increased the relative importance of financial assets on the corporate balance sheet, if comparedwith an accounting approach that is based on the historic costs of acquisition. FVA thus has been a core ingredient of the financialization of Western capitalism that has led to the increasing importance of the financial sector within the economy and within individual companies. During a financial crisis, in contrast, the value of financial assets based on FVA decreases much more strongly than under historic cost accounting. Arguably, FVA standards thus have contributed to the depth of the crisis, by forcing companies to sell assets on already depressed markets.
