Thursday, October 16, 2008

Too Late the Hero

imageI see that the Grey Men in Grey Suits have concluded that marking financial instruments to market isn't such a great idea after all, at least not when the market for those instruments disappears.  See the Australian story here and the IASB press release here.  Alas it's just a shade too late to help with the $700 bn of losses already booked.

Suggestions of bolting horses and stable doors.

It seems that organisations from the G7 to the BIS to the quaintly named Financial Stability Institute (a joint effort by the BIS and Basel people) are starting to point the finger at the accountants.  The BIS notes that the accounting treatment may have overstated the losses on AAA sub-prime mortgage backed securities by as much as 50%.

All this to avoid the evils of profit smoothing!

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