"Banking regulators must not allow their attempts to build up bank capital to distort financial statements, the top international accounting rulemaker has warned. ... Regulators are widely expected to develop some form of so-called 'dynamic provisioning' by forcing banks to salt away funds in the good times to help them through the bad. But accountants have warned that how this is done could seriously affect the transparency of banks' financial statements. ... Accountants worry that doing the latter could raise the risks of 'cookie jar' accounting where executives would boost provisions during periods of bumper profits to quietly release them in poorer periods to cover up bad performance. The complexity of accounting makes this hard for investors to spot. ... 'There has always been a battle between prudential regulators and the securities regulators over stability versus transparency,' said Sir David [Tweedie]. 'Our job is to show what's happened, not to have reserves that actually are not losses at the moment'," Jennifer Hughes at the FT, 24 February 2009.
In theory, this issue was settled in the US with SFAS 5's adoption in 1975. This accounting crap never ends. Banking regulators usually try to protect banks from the public. Look at the NCC fiasco, 9 and 18 June 2008 posts:
2 comments:
My favorite quote of the day...
"The world’s biggest maker of jet engines and power turbines told shareholders last week that 2 percent of GE Capital Corp.’s assets are being valued based on market prices. The remaining $624 billion is being carried at levels that GE, the last original member of the Dow Jones Industrial Average, established in many cases years ago, according to CreditSights Inc.
“The notion of having 98 percent opaque and 2 percent valued with clarity is something that by its very nature would make investors nervous,” said Robert Arnott, founder of Research Affiliates LLC, which oversees $30 billion in Newport Beach, California and owned 481,201 GE shares as of Dec. 31. “Having some clarity on what the other 98 percent is worth is valuable.”
IA
You keep hoping that the SEC will get some cajones and deal with the miscreants.
I will tell you why, the SEC from its inception was created to protect gangsters. Why do I say that?
Who was the first chairman of the SEC. If you know, you will know why the SEC was created. It was not created to go after swindlers and frauds. The SEC was created to protect them.
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