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"They can't get rid of this rule fast enough," says a bank analyst of the FASB's progress toward...

"They can't get rid of this rule fast enough," says a bank analyst of the FASB's progress toward eliminating the debt valuation adjustment (DVA) from bank earnings. The rule - which perversely adds to earnings as a bank's credit deteriorates (and subtracts from the bottom line as credit improves) - has been behind big whipsaws in reported numbers in recent quarters (Q3 will be no exception). "(It's) one of the more ridiculous concepts that's ever been invented in accounting," says Jamie Dimon.
Comments (9)
  • Brian Bobbitt
    , contributor
    Comments (1888) | Send Message
     
    Just follows along with my prior comments of why I don't like banks. We really need to rethink the way we allow our bankers to do business, it is a sham.

     

    Capt. Brian
    The Lost Navigator
    30 Sep 2012, 11:23 PM Reply Like
  • aehalpha
    , contributor
    Comments (6) | Send Message
     
    So, will they get rid of the rule or not?
    1 Oct 2012, 12:21 AM Reply Like
  • RALPHSCHAUSS
    , contributor
    Comments (58) | Send Message
     
    This FASB rule of DVA for banks is absolute rubbish.With all the REG hype going on - why is not abolished today ?

     

    Frankfurt,Germany
    1 Oct 2012, 04:21 AM Reply Like
  • MexCom
    , contributor
    Comments (3050) | Send Message
     
    Don't bother clicking the links - just another WSJ advertisement to subscribe.
    1 Oct 2012, 06:37 AM Reply Like
  • dkgoyal
    , contributor
    Comments (3) | Send Message
     
    Why was DVA allowed by FASB? Were there any positives?
    1 Oct 2012, 10:27 AM Reply Like
  • dkgoyal
    , contributor
    Comments (3) | Send Message
     
    I did some further investigation on this subject. It appears that financial institutions were lobbying for DVA and argued that it wasn't fair to make them mark their assets to market value if they couldn't also mark their liabilities. (quoted from http://bloom.bg/R7L258)
    In my opinion, this argument holds no merit. Balance sheet is a snap shot. It is correct to show depreciated values of assets because if today company has to get rid of those assets, that is the value company will get. However, in case of debt bonds, a company will need to pay full face value. EVA rule doesn't really make any sense.
    1 Oct 2012, 02:47 PM Reply Like
  • ECWD
    , contributor
    Comments (7) | Send Message
     
    DVA seem not to be logical. How does it work? It seems to be
    in reverse.
    1 Oct 2012, 11:47 AM Reply Like
  • User 509088
    , contributor
    Comments (935) | Send Message
     
    maybe a different colour code for pay links...
    1 Oct 2012, 12:18 PM Reply Like
  • RALPHSCHAUSS
    , contributor
    Comments (58) | Send Message
     
    DVA is Alice in Wonderland accounting, and then we have 12 or more regulator parties in the US overlooking the banks right up to committees of Congress and the Senate,

     

    Frankfurt, Germany
    3 Oct 2012, 02:59 AM Reply Like
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