Civil War In Corporate America: Banks Battling The Chamber On Accounting Rules

[AllentownJake]

Amid the ongoing financial regulation overhaul, the banking industry is hoping to pull off a quiet power grab that has eluded its grasp since the Great Depression, by stripping the independence of the board that sets financial accounting standards.

The move could effectively let banks set their own accounting standards in rough economic times.

Astonishingly, at a time when the public is crying out for greater regulation to limit excessive risk-taking by financial institutions, the banks are trying to get Congress to agree that the next time there's a big downturn, they should have the ability to alter their accounting standards -- essentially, fudge the numbers -- so that the public and investors won't be able to tell how insolvent they really are. By ignoring their declining asset values, they can avoid the standard requirement of raising more capital.



Read more at: http://www.huffingtonpost.com/2009/11/05/civil-war-in-corporate-am_n_347704.html&cp

You can't make this shit up anymore...oh and it is a Democrat proposing this.

[Uncle Joe]

1. What's the deal with Perlmutter?

:shrug:

Thanks for the thread, AllentownJake.

[AllentownJake]

2. I'm sure it can be traced to a fundraiser...

[Raineyb]

3. Holy shit!

That is BAD and should not be allowed.

There is no way anyone would be able to make informed decision on where to invest one's money if you can't trust your forms to be consistent with accounting standards. And it makes the data you get completely unreliable. IN addition, it makes it impossible to compare data from period and period because it's not consistent. This is the antithesis of what they teach in accounting classes. What the fuck is this dude thinking and is he an accountant or just some fucker on the take?

[AllentownJake]

4. I don't know

ever since SOX when FASB has become politicized it has been down hill. It used to be a group of college professors writing rules....it has evolved into something congressman and Senators go to lobby or legislate.

[Raineyb]

5. I just took a test on Wednesday covering balance sheets and income statements

and it certainly makes me wonder how those documents, especially the balance sheet, would be useful from period to period if it were that easy to change how things are evaluated. So assets are at cost one month then at fair value the next then what?

I'm a mere student but it doesn't sound as though it bodes well at all.

[AllentownJake]

7. under normal circumstances

Companies have to provide comparative financial statements with both the old and new principles for the next reporting period so the change in accounting principle can be understood. Principle changes are supposed to be made to improve accuracy...not hide things.

[Raineyb]

8. True, but that doesn't sound like what this bill is proposing. It sounds as though

the banks want the ability to easily change their accounting principles in order to hide losses and it look as though their books are healthier than they actually are particularly in respect to bad loans.

It is my understanding that changes in accounting principle are deliberately a pain in the ass to deal with and that you need permission to do it in the first place.

[AllentownJake]

9. yes

Congress should not be getting involved in setting accounting rules

[BeHereNow]

6. Just when you think it can't get worse...

It actually does.
Outrageous.
Especially in light of the fact that we have no one among our representatives
who will stop it.
Brings Enron accounting to my mind... anyone else?
BHN

[amandabeech]

10. This is an incredibly bad idea.

Fudged up financial statements have always led to disaster sooner or later.

If this goes through, stay away from investing in any financial institutions.

I used to prepare SEC filings for community banks, and I can't believe that they are the ones who are really behind this. It's still hard for me to imagine a more conservative group of business folks.