Fair Value Accounting in the Banking Industry

This paper studies the application of fair value accounting in bank holding companies in the United States with the purpose of evaluating the effects of expanding fair value accounting in the banking industry. The primary conclusion of the analysis is that expanding fair value accounting is not likely to significantly improve the information in bank financial statements and, in some cases, may introduce distortions that reduce accounting quality.

Columbia Business School Professor Doron Nissim was commissioned as principal project consultant, with Stephen Penman as project director.