Essay on Fair value accounting is the wrong scapegoat for the recent financial crisis. Critically appraise whether you agree/disagree with this statement.

It is a harsh reality that rather looking and identifying the real reasons behind the financial crisis, the stakeholders of the financial system tend to look for scapegoats so that they can turn away from reality. The recent financial crisis hitting economies all around the world has been a point of debate for a few years, and this debate has been surrounding the concept of fair value accounting. It is interesting to see that a lot of research and viewpoints have been made in favor of or against fair value accounting in the context of the financial crisis. In simple terms, the fair value accounting has been considered a guilty one, which played its major part in developing this financial crisis. But when facts and figures and information were analyzed in detail, it proved that role of fair value accounting has not been so viable in this regard, rather it is just an estimation made by the stakeholders to throw their responsibilities, and blame someone else for this financial crisis. I agree with this statement that “Fair value accounting is the wrong scapegoat for the recent financial crisis.” (Veron, 2008)

            It was important to analyze the situation and find out, whether fair value accounting is the culprit for this financial crisis. If the answer is no, then financial experts should look for other valiant reasons, and if the answer is yes, then they should understand why it happened so, and how it can be avoided in the future. The previous learning from the research is critical for finding measures to avoid future risks in the financial arena. A research study was conducted in 2017 to understand the role of future value accounting in the essence of the financial crisis. The researchers tried to explore why fair value accounting is being blamed, and what the actual truth is. They came up with a methodology to analyze data from previously available data and research to see the relationship between a financial crisis and fair value accounting. Various kinds of empirical research and theoretical knowledge were analyzed in detail. After analyzing the data and looking at fair value accounting’s role in the financial arena, the researchers found that fair value accounting has little or nothing to do with the financial crisis. It is just propaganda to turn the focus away from real issues. It was proved that the role of the messenger was performed by fair value accounting, but it is not the major reason behind the financial crisis (Menicucci & Paolucci, 2017)

            The above statement is true that fair value accounting’s consideration as responsible for the financial crisis is a wrong scapegoat. Here is another empirical research to prove that fair value accounting cannot be blamed for the financial crisis, rather there are various other important elements to look at. This research was conducted in 2016, and its basic purpose was to establish any relationship between the financial crisis and fair value accounting. To collect data for proper analysis, the researchers opted for a descriptive literature review, where a range of theoretical knowledge along with empirical research was analyzed. This analysis was done to establish whether fair value accounting is guilty of making this financial crisis, or there are other aspects to look at in this regard. After analyzing data, it was found that research in this regard has been on a very limited scale. There is almost no data available to see how the financial crisis and fair value accounting can be associated with each other. That’s why no empirical and concrete evidence was found to establish that fair value accounting is the real reason (Paolucci & Menicucci, 2016)

References of Fair value accounting is the wrong scapegoat for the recent financial crisis. Critically appraise whether you agree/disagree with this statement. 

Menicucci, E., & Paolucci, G. (2017). Fair Value Accounting within a Financial Crisis: An Examination of Implications and Perspectives. International Journal of Business and Social Science, 8(2).

Paolucci , G., & Menicucci, E. (2016). Fair value accounting and the financial crisis: a literature-based analysis. Journal of Financial Reporting and Accounting, 14(1), 49-71.

Veron, N. (2008). Fair Value Accounting is the Wrong Scapegoat for this Crisis. Accounting in Europe, 5(2), 63-69 .