Publication Date


Document Type


First Advisor

Norton, Curtis L.

Degree Name

B.A. (Bachelor of Arts)

Legacy Department

Department of Accountancy


An alarming number of banks have been failing in the past decade. One possible variable that led to the downfall of many banks is the fact that their investments were valued below market. On the balance sheet, bank's investments are required to be reported at historical cost. Users of financial statements were, therefore, misled by the actual value of a bank's investments because the amount recorded was higher than the current market rate. As a result, the Financial Accounting Standards Board has begun a project to determine if market value accounting should be required on the financial statements. Two phases of the project, which dealt with increased disclosures of market value data, have been completed. An additional phase, however, is still in progress to determine if financial statements should report certain assets at market value. The scope of my research study is to provide a general framework of historical cost accounting and the financial instruments project, analyze the pros and cons of market value accounting, and provide a recommendation concerning the use of market value accounting on the financial statements. From the articles read, discussing the banks' needs as well as the financial industrys' needs, I have proposed a compromising solution. In general, a bank's investment securities should be valued at market to maintain fair disclosure of financial information to users.


25 pages




Northern Illinois University

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