Font Size: 

During years 2007 and 2008, financial institutions keeping risky subprime mortgaged-backed securities reported vast losses. The trade of mortgaged-backed securities was common practice during previous years. This financial crisis has been linked to fair value regulations (Magnan, 2009). In response to this, the International Accounting Standards Board (IASB) had to amend IAS39 (Financial Instruments: Recognition and Measurement) to allow the reclassification of some financial assets. Therefore, there are still unanswered questions on the effects of this amendment, such as, is it possible that financial institutions may have taken advantage of this amendment to be involved in earnings management? This paper examines and attempt to clarify mechanisms of accounting regulation during the financial crisis.

Accounting, regulations