Securitization Accounting Rules Are Changing
June 1, 2009
Accountants are changing the rules governing most of the shadow banking system and almost no one is noticing. About 10 days ago the Financial Accounting Standards Board confirmed that by year end “securitization accounting” will be different and the changes are likely to have a bigger effect on financial institutions than mark to market accounting. The new accounting rules will make it much harder for financial institutions to count securitizations as “off balance sheet” transactions and will reconsolidate, i.e., put onto the balance sheet, a large number of transactions that are currently accounted for as off balance sheet. Read more
Goodbye GAAP, Hello IFRS. Will You Be Ready?
May 26, 2009
It’s become clear throughout the past five years that GAAP and financial reporting in the United States is on a clear path toward change in the form of a convergence with the International Financial Reporting Standards (IFRS). World events, most notably the London G-20 Summit, have been calling for a single, high quality set of accounting standards that all companies will use to file. The SEC has recently made definitive steps toward this change, enough to make me believe that IFRS will be here before we know it, so it’s time to get ready. Read more
FASB’s Mark-to-Market Changes: Effective or Not?
April 14, 2009
With Wall Street responding favorably to FASB’s mark-to-market accounting rule changes, the question becomes: what will the long term effects be? After much speculation and debate, FASB decided to loosen the mark to market accounting rules in FASB 157, allowing balance sheets to stray away from the strict fair value accounting that is believed to have intensified the market turmoil. Critics of fair value felt, in a quick summary, that with toxic assets like the mortgage backed securities having to be written down to next to nothing, the banks’ reserves were to be hit dramatically. This destroyed the ability of banks to lend, causing companies to not be able to borrow, which caused the economy to down-spiral into a global recession. Instead, banks now have the freedom to value assets using their own valuation models, at what they feel they would be worth under “normal” market standards.
