Hardly a day goes by without an article appearing on the crises affecting many of our financial institutions. It is estimated that the financial crisis of 2007–2008, for example, caused a deep recession. Some argue that if financial institutions had been required to report their investments at fair value instead of cost, large losses would have been reported earlier, which would have signaled regulators to close these financial institutions, therefore minimizing the losses to many investors. 

Instructions

Explain how reported accounting numbers might affect an individual’s perceptions and actions. Cite two examples.