http://wallstreetpit.com/12751-two-sets-of-books-require-two-sets-of-accounting-standards Tue, 22 May 2012 19:21:52 +0000 hourly 1 http://wordpress.org/?v=3.3.1 http://wallstreetpit.com/12751-two-sets-of-books-require-two-sets-of-accounting-standards#comment-85763 Linda Lowell Wed, 09 Dec 2009 15:43:30 +0000 http://wallstreetpit.com/12751-two-sets-of-books-require-two-sets-of-accounting-standards#comment-85763 Suggest you read the actual comments to the rules proposed by depository regulators in response to adoption of FAS 166 and 167 BEFORE you glibly dismiss as Wall Street is pushing back and may get its way. FAS 166 and 167 are rush job (pols drooling for a FASB response) fixes to a Rube Goldberg paper-clips and gum set of evolving rules. They do not 100% capture offenses like SIVs, they don't always put the structure back on the makers/servicers balance sheet, and they catch a lot of harmless fish in the net and in some cases inflate balance sheets without adding any information for investors, creditors, regulators and other users of GAAP reports. Also, Herz has been struggling for months to get Congress clowns and anyone who will actually listen to understand that regulators have a different objective using GAAP reporting than other users.GAAP should not be designed for specific industries - it's up to regulators to build on GAAP. Regulators have continued since the thrift crisis to adjust GAAP items when assessing regulatory capital. There is no reason why they shouldn't, given their responsibility for the functioning of the SYSTEM, on which the economy depends, not take into account issues like the pro-cycle nature of GAAP reporting. Specifically, with regard to fair value accounting, investors have rightly focused on banks' tangible capital while regulators have continued to reverse the effects of fair value accounting on available for sale assets (as most bank security investments are accounted for). This regulatory treatment of GAAP capital accounts has been in place for YEARS. Herz speech is simply a reminder that FASB has a different mission than do bank regulators. Suggest you read the actual comments to the rules proposed by depository regulators in response to adoption of FAS 166 and 167 BEFORE you glibly dismiss as Wall Street is pushing back and may get its way. FAS 166 and 167 are rush job (pols drooling for a FASB response) fixes to a Rube Goldberg paper-clips and gum set of evolving rules. They do not 100% capture offenses like SIVs, they don’t always put the structure back on the makers/servicers balance sheet, and they catch a lot of harmless fish in the net and in some cases inflate balance sheets without adding any information for investors, creditors, regulators and other users of GAAP reports. Also, Herz has been struggling for months to get Congress clowns and anyone who will actually listen to understand that regulators have a different objective using GAAP reporting than other users.GAAP should not be designed for specific industries – it’s up to regulators to build on GAAP. Regulators have continued since the thrift crisis to adjust GAAP items when assessing regulatory capital. There is no reason why they shouldn’t, given their responsibility for the functioning of the SYSTEM, on which the economy depends, not take into account issues like the pro-cycle nature of GAAP reporting. Specifically, with regard to fair value accounting, investors have rightly focused on banks’ tangible capital while regulators have continued to reverse the effects of fair value accounting on available for sale assets (as most bank security investments are accounted for). This regulatory treatment of GAAP capital accounts has been in place for YEARS. Herz speech is simply a reminder that FASB has a different mission than do bank regulators.

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