ABSTRACT
This chapter focuses on just one aspect of fair value accounting in the Great Financial Crisis (GFC). During the financial crisis the FASB and the International Accounting Standards Board (IASB) responded to concerns about the impact of fair valuation on banks' accounts by introducing modifications to the core regime. IASB fair value measurement standard, International Financial Reporting Standard (IFRS) 13, was developed as the GFC unfolded; and it was issued in its aftermath. US and international standard-setters intend fair values to be calculated using the prices at which an asset might be sold, or the liability transferred, in an orderly transaction between market participants. In relation to the financial crisis, Ryan argues that the trigger for the GFC was a gross error by the securities market: 'underwriting in the subprime mortgage industry had been lax and losses on subprime mortgages would likely considerably exceed those expected by the market'.
