Fair Value Accounting Leads to Volatility; Volatility Leads to Litigation

TAX TOPICS

Did fair value accounting standards, issued by the Financial Accounting Standards Board, and required to be applied for fiscal years ending subsequent to November 2007, hasten the onset of the current economic and financial crisis? What will be the impact of these standards on legal and accounting activities in the future? What will be the impact of FASB’s April 2009 rule change giving financial institutions more flexibility in valuing assets? These unknowns are one of the most hotly contested debates in the accounting profession today, and one that is likely to reverberate through accounting and legal circles, with significant impact, for years to come. The subprime meltdown, the massive write-downs in complicated mortgage-related securities, the recent failures of and threats to financial institutions, the continuing write-down of goodwill by public companies and the current credit crisis have focused enormous attention on the methods used to determine asset values reported in financial statements, hence the increased levels of focus and the urgent nature of appropriate fair value accounting.