Faith Based Accounting
“Mark to Market” accounting means that you show assets on your balance sheet at their market value. Although the SEC and FASB (an organization that writes accounting rules) are resisting, the bright lights in Washingon are working to have the mark-to-market rule suspended:
Congressmen, banking lobbyists and companies including American International Group Inc. have urged the SEC to suspend fair-value accounting, saying it forces firms to report losses they never expect to incur. Federal Reserve Chairman Ben S. Bernanke and other proponents say removing the rule would erode confidence that firms are owning up to losses.
If we close our eyes, think real hard, and click our heels together three times, the toxic waste on our balance sheets will magically turn into ponies, and everybody gets one!
Representative Todd Tiahrt, a Kansas Republican, said the House probably would have approved a $700 billion bailout of financial companies yesterday had the legislation included a suspension of fair-value accounting. The House rejected the measure 228-205.
It would have passed “easily” if the rules had been suspended, Tiahrt, who opposed the legislation, said today in a Bloomberg Television interview.
But if nobody wants to buy your piece of the Shitpile, is it worth anything?
Fair-value rules require companies to determine how much assets are worth based on what they could expect to sell them for on the open market.
“Suspending the mark-to-market prices is the most irresponsible thing to do,” said Diane Garnick, who helps oversee more than $500 billion as an investment strategist at Invesco Ltd. in New York. “Accounting does not make corporate earnings or balance sheets more volatile. Accounting just increases the transparency of volatility in earnings.”
NAH NAH NAH NAH I CAN’T HEEAARRRR YOOUUU!!!:
Anne Canfield, executive vice president of the Consumer Mortgage Coalition, counters that businesses have been forced to “mark down their assets to unrealistic fire-sale prices,” because trading has dried up. Canfield, whose group represents mortgage lenders, urged the SEC to suspend fair-value rules “immediately” in a Sept. 29 letter to the agency.
Ignoring problems always makes them go away – just ask Lehman Brothers.
Norwalk, Connecticut-based FASB, which writes U.S. accounting rules, is preparing “additional interpretive guidance on fair-value measurements” to be released this week, the SEC said. FASB will discuss fair-value accounting at its board meeting tomorrow.
The American Bankers Association, a trade group representing lenders that has lobbied the SEC over fair-value accounting, praised the agency’s clarifications, saying they will “help auditors more accurately price assets,” according to a statement released today.
I have this watch, and I’ve valued it at $10 million, but for you, only $9.8 – today only. Act now or I’ll put it on ebay, bitchez.