Derivatives which is an asset-based contract between two or more entities, it is derived from one or more underlying assets. "The increasing development of derivative contracts means that, in a cost-based system, a group of assets and possibly liabilities would not appear on the balance sheet at all because they have little or no cost, but they might have a value of gain or loss as a result due to changes in interest rates, exchange rate or possible changes in commodity prices. The use of fair value accounting will provide a more realistic way of recording. balance sheet transactions and disclose them openly, and fair value will not force managers or business entities to purchase risky assets or enter the speculative market, which is one of the drivers of the financial crisis Therefore, fair value allows problems to be identified quickly, allowing decision makers to respond and providing more transparent financial data” (Shaffer 2010 However, Welch (2014) states that “fair value accounting). "The value of the liabilities will deteriorate when the entity's credit rating declines, which considers that a declining rating would contribute to decreasing the fair value of the company's instruments such as bonds." On the other hand, the use of fair value accounting valuation is widely accepted and used in many entities that hold the financial instrument in their portfolio. Fair value accounting had no impact on derivatives holders such as banks and other financial institutions during the financial crisis. The financial crisis was caused by poor loan management practices of banks and financial institutions during this period.