【正文】 esearch. Based on extant empirical evidence, it is difficult to evaluate the role of FVA in the current crisis. In particular, we need more work on the question of whether market prices significantly deviated from fundamental values during this crisis and more evidence that FVA did have an effect above and beyond the procyclicality of asset values and bank lending. In Section 2, we provide a quick overview over FVA and some of the key arguments for and against FVA. In Section 3, we discuss the concern that FVA contributes to contagion and procyclicality as well as ways to address this concern, including how current accounting practices help to alleviate problems of contagion. We consider potential implementation problems in Section 4 and conclude with suggestions for future research in Section 5. 2. Fairvalue accounting: What is it and what are the key arguments? FVA is a way to measure assets and liabilities that appear on a pany’s balance sheet. FAS 157 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” When quoted prices in active markets for identical assets or liabilities are available, they have to be used as the measurement for fair value (Level 1 inputs). If not, Level 2 or Level 3 inputs should be used. Level 2 applies to cases for which there are observable inputs, which includes quoted prices for similar assets or liabilities in active markets, quoted prices from identical or similar assets in 4inactive markets, and other relevant market data. Level 3 inputs are unobservable inputs (., model assumptions). They should be used to derive a fair value if observable inputs are not available, which is monly referred to as a marktomodel approach. Fair value is defined similarly under IFRS as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties, in an arm’s length transaction. In determining fair value, IFRS make similar distinctions among inputs as FAS 157: Quoted prices in active markets must be used as fair value when available. In the absence of such prices, an entity should use valuation techniques and all relevant market information that is available so that valuation techniques maximize the use of observable inputs (IAS 39). It is recognized that an entity might have to make significant adjustments to an observed price in order to arrive at the price at which an orderly transaction would have taken place (., IASB Expert Advisory Panel, 2020). 3. Fairvalue accounting, illiquidity, and financial crises FVA and its application through the business cycle have been subject to considerable debate (., ECB, 2020。 Banque de France, 2020。 IMF, 2020). The chief concern is that FVA is procyclical, ., it exacerbates swings in the financial system, and that it may even cause a downward spiral in financial markets. . GAAP and, more recently, also IFRS allow for a reclassification of fairvalue assets into a category to which HCA and less stringent impairment tests apply. . GAAP and IFRS have mechanisms to avoid negative spillovers in distressed markets and a downward spiral. To address contagion and procyclicality is not to have direct (mechanical) regulatory or contractual ties to FVA. For instance, it would be possible to adjust the accounting numbers for the purpose of determining regulatory capital. Such adjustments already exist. For example, for the purpose of calculating regulatory capital, the Federal Deposit Insurance Corporation and the Federal Reserve adjust bank’s equity as reported under . GAAP for unrealized losses and gains for availableforsale (AFS) debt securities to obtain Tier 1 capital (., Schedule HCR in FR Y9C). Thus, regulatory capital as calculated by . banking regulators is not affected by changes in the fair value of AFS debt securities, unless they are sold or the impairments are , Li (2020) documents that debt contracts often exclude fairvalue changes in accountingbased debt covenants. These examples demonstrate that it is not clear that contagion and procyclicality are best addressed directly in the accounting system. Perhaps these issues are better left to the prudential regulators and contracting parties, who in turn can make adjustments to the numbers reported in the financial statements as they see fit. In our view, this is an interesting issue for future research. In summary, Allen and Carletti (2020) and Plantin et al. (2020a)provide important contributions to the FVA debate by illustrating potential contagion effects. However, they do not show that HCA would be preferable. In fact, Plantin et al. (2020a) are quite explicit about the problems of HCA. Furthermore, they do not speak directly to the role of FVA in the current crisis because they do not model FVA as implemented in practice. As noted above, FVA as required by . GAAP or IFRS as well as . regulatory capital requirements for banks have mechanisms in place that should alleviate potential contagion effects. Whether these mechanisms work properly in practice is our next question. 4. Are there implementation problems with fairvalue accounting standards? Given the discussion in the preceding section, it is not obvious that extant accounting standards can be blamed for causing contagion effects. But it is possible that, in practice or in crises, the standards do not work as intended. Ultimately, this is an empirical question and answering it is beyond the scope of this article. But we can at least raise and discuss two important implementation issues. Many have argued that both the emphasis of FAS 157 on observable inputs (., Level 1 and Level 2) and extant SEC guidance make it very difficult for firms to deviate from market prices, even if these price