The credit crisis has spawned a spirited debate whether and to what extent the application of fair-value accounting contributed to global writedowns. A growing and coordinated chorus of voices has recently asked that fair-value rules be relaxed when markets become illiquid, to avoid "creating the impression of losses," as one fair-value critic put it. To those on the other side of the debate, such a proposal enables obfuscation and contravenes the principles underlying transparent financial reporting.
In the refined and polite world of accounting, it is an unusual and highly polarizing debate. It need not be so.
