【正文】 d 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 prices are below fundamentals or give rise to contagion effects (., Wallison, 2020a, Bigman and Desmond, 2020). Consistent with these claims, the relevant standards in . GAAP and IFRSas well as guidance for these standards are quite restrictive as to when it is appropriate for managers to deviate from observable market , such restrictions should not be surprising. By allowing deviations from market price in some instances, standard setters face the problem of distinguishing between a situation in which a market price is indeed misleading and a situation in which a manager merely claims that this is so in order to avoid a writedown. Without restrictive guidance, the standards could be easily gamed. There is evidence that managers can be reluctant to take writedowns even when assets are substantially with this concern, current estimates of banks’ loan losses far exceed the writedowns that banks have taken so far and they also exceed the difference between the loans’ carrying values and banks’ fair value disclosures for these loans according to FAS 107 (., Citigroup, 2020。L) crisis, this concern should not be underestimated. Thus, standard setters and enforcement agencies face a delicate tradeoff (., between contagion effects and timely impairment). Fourth, we emphasize that a return to historical cost accounting (HCA) is unlikely to be a remedy to the problems with FVA. HCA has a set of problems as well and it is possible that for 3certain assets they are as severe, or even worse than the problems with FVA. For instance, HCA likely provides incentives engage in so called “gains trading” or to securitize and sell assets. Moreover, lack of transparency under HCA could make matters worse during crises. We conclude our article with several suggestions for future research. 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 obse