Advanced Financial Reporting & Regulation Essay

Advanced Financial Reporting & Regulation - Essay Example However, the proponents of the fair value accounting method argued that this accounting technique was just a messenger and not a major cause or contributor of the subprime mortgage crisis. The paper critically assesses the arguments that have been placed regarding the fair value accounting method being a main reason for the occurrence of the subprime mortgage crisis or the GFC. The idea as to whether the fair value accounting method has actually contributed to the financial crisis or has only played a constrained role in exacerbating the intensity of the financial downturn is evaluated and assessed by taking into consideration the views and arguments presented by different scholars and academicians in their literary works prepared and presented in this topic. The use of empirical evidences and descriptive information are made to analyze and assess the role of the fair value accounting method in the financial crisis. The second part of the report includes a comparison of the advantages and disadvantages of the fair value accounting method with the traditional accounting methods like the deprival value method of accounting, historical cost method of accounting and the r eplacement cost method of accounting. The report is concluded with a suitable conclusion in which it is highlighted that the role of the fair value accounting practice is much limited as a major reason for the occurrence of the Global Financial Crisis of 2008. The role of the fair value accounting technique in the financial crisis of 2008 is a controversial and highly debated topic. The fair value accounting method is the generally used accounting standard in the United States of America and has been specified in the FAS 157 in the year 2007. This accounting method includes the terms of accounting in which the different kinds of financial assets like the mortgage backed securities are priced and valued as per the current market value or mark to market value instead