Anatomy of a Meltdown

Critics have blamed FAS 157 for exacerbating the global economic crisis of 2008. This paper investigates the links between Enron, the reintroduction of fair value accounting, the implementation of FAS 157, and the subprime mortgage crisis of 2008. The account describes the possible connections between these events and shows that the implementation of the Sarbanes-Oxley Act was pivotal in determining the role that fair value accounting played in the economic crisis. The study highlights the great influence that public policy has on accounting practice, and the drastic consequences that such influence, although unforeseen, can bring about