Generally Accepted Accounting Principles (GAAP) is an accounting system that relies primarily on cost to establish balance sheet values. This works well when hitched to a depreciation system that reduces the value of assets as they are used up or made obsolete. But how should companies account for financial assets like mortgages or mortgage-backed securities? They do not depreciate, but their value changes with interest rates and with the ability of borrowers such as homeowners to meet their loan obligations. Fair value accounting, which was introduced into GAAP in the early 1990s, seeks to bring the balance sheet values of financial assets closer to market values. That seems reasonable in general, but it introduces significant volatility into the financial results of banks, securities firms, and other financial intermediaries. When market values fall substantially, as they have recently, fair value accounting has forced the recognition of losses that some contend were more severe than warranted by economic reality. As S&P analysts wrote recently, “when we dissect the percentage of writedowns taken against various types of exposures, the magnitude . . . is greater than any reasonable estimate of ultimate losses.” Is fair value accounting being implemented in a way that creates unrealistic losses? Is it good or bad for the economy? Is there a more reasonable way to account for financial assets? This conference will address these and other questions.