Legend and truth of fair value in the financial crisis

Fair value is a plus or a minus? The recent financial crisis have touched on accounting standard setting and the role in which accounting information contributed to the market turmoil. In this regard, fair value has been, more than ever in the spotlight, as many bankers, political figures, and commentators contending that it was a major contributing factor to the procyclical decline in the value of bank assets. In this context, we are looking for the role of fair value analyzing its legends and truths through the financial crisis. Because banks were at the center of this market turmoil, we focus our discussion and analysis on 46 European financial institutions with the largest influence and impact on both the economy and society in Europe. The analysis presented lead us to conclude that, contrary to what many of fair value contend, it played little or no role in the financial crisis; therefore, it could be blamed neither having caused nor having exacerbated the financial crisis. It is clear that the valuation of certain securities might be artificially low and could recover, though it is the duty of accounting reflecting the current situation and not necessarily a probable future.