Fair-Value Accounting’s Role in the Global Financial Crisis?: Lessons for the Future

Abstract

This paper debates how fair-value accounting (FVA) that were deeply affected by the global financial crisis. The global financial crisis started in advanced economies spreading to emerging markets and low-income countries. Thus, it has been affected in the middle of 2007 and into 2009, which have examined the role of FVA in the financial crisis. This paper is used the value-relevance of fair-value reported under FAS 157 that estimates assets and liabilities in terms of a simple theoretical and empirical analysis literature framework. This empirical study proposed is a global crisis that not a normal cyclical crisis of capitalism. Also, it requires a change in the management policy to be tackled with new regulatory frameworks for financial institutions in order to stimulate economic activities. In other words, FVA may have amplified the crisis. Future research is needed to meet up-to-date information regarding the nature of capital markets and financial institutions. This requires a new theory of economics; for instance, a change from equilibrium theory to reflexivity theory which requires a change in the underlying model of the economic activity framework. Therefore, this study has concluded a new theory of the change of equilibrium to reflexivity that led to develop the model in the framework of the economic activity.

The Impact of Pernyataan Standar Akuntansi Keuangan 68 Application Guidelines for Banking Sector Issued by Otoritas Jasa Keuangan (OJK)

“…In accordance with (Masoud & Daas, 2014) research in their research, Fair Value Accounting (FVA) is an important part of economic recovery and mark-to-market can be useful in preventing a similar crisis that occurred in 2008-2009. With the guidance for the application of PSAK 68 for the banking sector by OJK which has taken into account many aspects of fair value measurement, especially securities, the banking sector has proven to have increased during the Covid-19 pandemic.…”

“…There is an increase in the financial growth of banking companies in Indonesia due to the guidance on the application of PSAK 68 for banking by the OJK shows a positive influence on the financial recovery of the banking sector. As stated by (Masoud & Daas, 2014) in their research, Fair Value Accounting (FVA) is an important part of economic recovery and mark-to-market can be useful in preventing a similar crisis that occurred in 2008-2009. With the guidance for the application of PSAK 68 for the banking sector by OJK which has taken into account many aspects of fair value measurement, especially securities, the banking sector has proven to have increased during the Covid-19 pandemic.…”

“…Laux and Leuz say that fair value accounting does not contribute to problems in US banks and plays little role in bank income statements and regulatory capital ratios unless banks have large trading positions (Laux & Leuz, 2010). In addition, Masoud and Daas stated that Fair Value Accounting is a necessary part of economic recovery and with the revision of existing standards, mark-to-market can be proven as a valuable tool in preventing similar crises in the future (Masoud & Daas, 2014).…”

: (Fair Value in Finance: Fifty Shades of Fairness)

“…Некоторые исследователи (Küting, Lauer, 2009;Журнал НЭА, № 3 (39), 2018, с. 85-109 Emerson et al, 2010;Masoud, Daas, 2012) прямо заявляют, что применение справедливой стоимости для оценки активов привело к развитию этого финансового кризиса. Более осторожные авторы (см., например, (Leuz, Laux, 2009;Fahnestock, Bostwick, 2011;Leuz et al, 2012)) предполагают, что применение fair value если и не послужило прямой причиной кризиса, то по крайней мере ему способствовало 10 .…”

Fair Value in Finance: Fifty Shades of Fairness

“…Какова же роль справедливой стоимости в финансовом кризисе 2007-2009 гг.? Некоторые исследователи (Küting, Lauer, 2009;Masoud, Daas, 2012) прямо заявляют, что применение справедливой стоимости для оценки активов привело к развитию этого финансового кризиса. Более осторожные авторы (см., например, (Leuz, Laux, 2009;Leuz et al, 2012)) предполагают, что применение fair value если и не послужило прямой причиной кризиса, то по крайней мере ему способствовало 10 .…”