Roland Cycan

BofA, Wells Fargo: No Equity After Accounting for Bad Loans

Actually, most accountants are rather conservative in their treatment. Conservatism is, or was when I went to school, taught and usually expressed as taking the option from among the reasonable options that shows the lowest income this year (or lowest current value).

After all, you really don't want to report to your investors that assets are worth $100 when collectability of that $100 is in reasonable doubt.

However, most senior managers do not want conservateive statements prepared. They prefer aggressive accounting, and for most of the last couple of decades got away with it. They were also in position to override their staff accountants' judgements, and to influence the duditing firms ( may need a different auditor next year after all, and similar veiled threats ).

Boards of Directors should insist that the Chief Accounting Officer (sometimes the CFO, sometime not) report directly to the Board, not to the the CEO. And they should do what they can to remove influence of the CEO in choosing auditors.

The accounting staff cannot be watchguard for the Board if they report to the CEO.




On Mar 05 11:34 PM dare16 wrote:

> Fair value accounting should be abolish, it is an evil which make
> co achieve better performance when the economy is good but make financial
> statement worse than it should have when economy is bad.