ACCOUNTANT

GE Capital: Next CIT?

One has to look at what GE Credit finances before getting too carried away. Much of their financing relates to the products they sell - and those products will experience very low default rates. If GE credit were as weak as this article implies, Immelt would not be pulling out all the ammunition in his fight against having to spin it off into a separate company, which is what he is currently doing. Sorry Tyler, but you have completely misread this one.

Too Late to Complain About Mark-to-Market

Mark to market in a volitile market causes total distortions of the income statement, which will excaberate both the highs and the lows in such a market.

Take for example Conoco Phillips, which was required to write down purchased oil inventory values by $34 billion due to low oil prices at end of 2008. Anyone that thinks oil is going to stay at current prices for 3 - 5 years out are kidding themselves.

As such, when oil goes back up, COP will be recognizing fictitious gains resulting from the fictitious losses it reported in 2008. In neither case will the bottom line reflect the true income earned. Mark-to-market assumes assets will be liquidated at the point of valuation - going concern accounting assumes the entity will continue operations into the future and that temporary price fluctuations should be ignored unless the asset is to be disposed of in near future.