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The role of accounting in the global financial crisis. Assumptions and realities

Author

Listed:
  • Neculai Tabara

    (“Alexandru Ioan Cuza” University of Iasi)

  • Alina Rusu

    (“Alexandru Ioan Cuza” University of Iasi)

Abstract

The financial crisis prompted some players to denounce the role of financial markets "fair value accounting" required by the accounting rules used by the major listed companies in the world, U.S. GAAPs in the U.S. and IFRSs in Europe. This paper is related to the link between accounting and the global financial crisis. As technical research, we use the procedure of reviewing the literature. The criticism of fair value accounting are considering in particular two problems: the lack of liquidity (as may be assessed on the balance sheet financial instruments not traded in the market) and the pro-cyclicality (emphasizing the economic phases of expansion and recession). These difficulties are real, but the solutions offered - temporary or permanent modification of existing rules in order to limit the scope of this method of accounting – are not at all convincing. Although it is easy to identify gaps in fair value is still more difficult to propose an alternative option to respond more effectively to the requirements of relevance, reliability, comparison and understanding necessary for financial accounting rules In particular, the reference to historic price, often raised, would provide more than comparable and much less relevant.

Suggested Citation

  • Neculai Tabara & Alina Rusu, 2011. "The role of accounting in the global financial crisis. Assumptions and realities," EuroEconomica, Danubius University of Galati, issue 29, pages 16-22, August.
    • Handle: RePEc:dug:journl:y:2011:i:29:p:16-22
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    File URL: http://journals.univ-danubius.ro/index.php/euroeconomica/article/view/977/814
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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