It seems that the balance sheet has morphed from being merely the result of a series of arcane arithmetical processes into something quite different. Increasingly, it seems that financial statements must have real meaning. In order to do this, they have to be based on something called fair value. To a limited extent, of course, fair value has always had a place in the accounts. The trend towards fair-value accounting has been developing for a long time. It started with accounting for takeovers, prompted by the realization that firms using the merger method were stealing a march on those using acquisition accounting. The sub-prime crisis has created many problems for some of the biggest names in financial services, which have been forced into huge write-offs.