Fair Value Accounting within a Financial Crisis: An Examination of Implications and Perspectives
Elisa Menicucci, Guido Paolucci

Abstract
The aim of this paper is to discuss the role of Fair Value Accounting (FVA) within a financial crisis. The study examines the controversial topic Fair Value use and its suspected procyclicality. It also inspects the various distorted effects created by the interaction between FVA and the economic downturn and upturn of the financial system, in order to offer solid reflections for improving the Fair Value research agenda. The study reveals that FVA played little or no role in a financial crisis and it cannot be considered the cause of it, but only a messenger. FVA provides useful information during stable market conditions, but its usefulness and reliability may become uncertain during a financial markets’ turmoil. In this respect, the key question is not essentially the accounting model itself but how such accounting information is used.

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