Abstract: the advent of the great recession in 2008 was the culmination of a perfect storm of lax regulation, a growing housing bubble, rising popularity of derivatives instruments, and questionable banking practices. In addition to these causes, management incentives, as well as certain us accounting standards, contributed to the financial crisis. We outline the significant effects of these incentive structures, and the role of fair value accounting standards during the crisis, and discuss implications and relevance of these rules to practitioners, standard-setters, and academics. This article is based on a presentation by deputy dean and professor sp kothari of the sloan school of. Management, massachusetts institute of technology, at baruch college on october 25, 2010. The role of accounting in the financial crisis: The great recession that started in 2008 has had significant effects on the us and global economy; estimates of the amount of us wealth lost are approximately trillion (luhby.