The value of the assets and liabilities of a financial undertaking forms the basis for all solvency supervision. Financial supervisors' capital and liquidity requirements are based on prices and rates and their valuation by the accounting system. Over a long period of time, historical cost and market value proved to be reliable and verifiable bases for the valuation of an asset. In recent years of financial crisis, however, confidence in market values has been badly shaken. Markets collapsed or dried up. Others became so volatile that the current market price appeared to be random.

The consequence has been that today, instead of market value, the fair value based on assumptions and forecasts is determined for many financial products. Even in cases where a genuine market value can be determined in principle, the high cost of an exact valuation is sometimes an obstacle, for example in the case of valuing real estate as security in the lending business.

Accounting questions have traditionally played a major role in supervisory practice. BaFin collaborates in the interpretation of accounting rules, comments on proposed legislation and develops standards for the presentation and audit of financial statements. Where necessary, BaFin also adjudicates on appeals against rulings by the Financial Reporting Enforcement Panel (FREP) as the second stage of the enforcement process for accounting standards.

As a general rule, BaFin relies on the high quality of German accounting and auditing on the basis of the opinions and standards issued by the Institute of Public Auditors in Germany (Institut der Wirtschaftsprüfer – IDW) and the Accounting Standards Committee of Germany (Deutsches Rechnungslegungs Standards Committee – DRSC), and monitored by the FREP. For some time, BaFin itself has been looking at valuation standards and procedures more closely. It has therefore established a division concerned with questions of accounting practice, such as the scope for flexibility in making valuations and the options available to the undertakings. The objective is to form its own understanding of the processes involved in arriving at the values which form the basis for many fundamental indicators in financial supervision. BaFin has also authorised the division to carry out its own inspections for this purpose in particular cases.