ABSTRACT
The development of fair value accounting (FVA) has a tangled history in the sense that fair value has long been used to deal with a number of problematic areas. The one thing that the standard-setters have been firm about when faced with great pressures to row back on the application of FVA is that standalone derivatives must continue to be measured at fair value. Many factors were blamed for the 2008 financial crisis, FVA being one of them. The financial crisis posed a particular challenge for the International Accounting Standards Board because its standards were applicable to firms operating in countries exhibiting very different degrees of financial market development. Whether recognition of own credit risk gains and losses helps or hinders investors is an empirical question, the answer to which depends on whether financial statement users can figure out what is going on.
