A research fellow from the American Enterprise Institute has claimed that the recent Q3 results released by Lehman Brothers show that fair value accounting has reached 'absurdity'.
Writing to the FT Alex J. Pollock said: '…if the "fair market value " of your debt goes down – perhaps because the bond market considers you a worse credit risk – while you owe exactly the same amounts to your creditors as you always have, you can then declare a "profit".'
Pollock added: 'The "fair value" accounting theorists have thereby arrived at absurdity.'
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