Did Fair Value Accounting Contribute to the Financial Crisis?

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In 2007/8 there was the start of a global recession, which has also been referred to as the credit crunch. The writer looks at the claim that fair value accounting (FVA), also referred to as mark to market accounting (MTM) contributed to the occurrence and the extent of the crisis. The writer starts by looking at how fair value accounting operates and the arguments which have been proposed for its contribution to the crisis. The arguments are assessed. The writer looks at the advantages and the disadvantages and assesses an alternative approach. Two large firms accounts are examined looking at the way that assets are valued. Eleven sources are cited in the bibliography of this fourteen page paper.