Does compliance with some of our accounting rules lead to large swings in reported earnings that do not reflect the true economic state of a firm? If we are to use fair-value accounting, how do we ensure that both assets and liabilities are correctly and equally marked to market?
And we need to understand how particular elements of accounting rules can affect the risk-taking behaviour of financial institutions and investors. The issue of the right regulatory balance can also be looked at in relation to questions about the most efficient structure of financial institutions.