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19 Sep 2008
Jon Moulton has branded the accounting rules governing banking disclosures 'absurd' after the implosion of Lehman Bros.
Speaking to Accountancy Age before a high-profile COA Solutions conference at the ICAEW in London, Moulton said: 'Lehman Brothers went that way because [investors] didn't trust the numbers. They didn't trust the numbers because they don't understand them because of the complexity of the things that are put in place and the absurd accounting that's been wrapped around it.'
The 'How to prosper in a downturn' event was attended by 150 FDs looking for guidance on how to make the most of tricky market conditions.
Moulton was referring to the mark-to-market requirements of fair value, which force companies to put a price on assets at current market value. Companies often have to use complicated models to work out the values because there is no market for some of these holdings.
Moulton said that efforts to iron out the kinks in accounting rules by standard setters were welcomed, but there was still a long way to go.
'Anti-complexity projects are at a least a gesture in the right direction, but actually they need putting through with an axe,' he added.
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Briefings
By looking at the reasons supplier statements became unfashionable, and the reasons why it is different today, this paper delves into the many benefits that can be obtained by automating the process.
Having a real and true view of your organisation’s current financial position, and having the right systems and processes in place, will ensure that you can make strong choices and are ready to capitalise on opportunities
AccountancyAgeInsight is a frequently updated resource centre for finance professionals, offering a free and easy-to-use digital library of briefings, white papers and other information resources. 
Visitor comments Add your comment
Possibly. Markets are irrational sometimes.
Presumably, sophisticated investors who could see the long term real economic value based on full disclosures would then arbitrage any opportunity.
Maybe some elements of Chapter 11 rules may be helpful in the UK. With restrictions on lengthy protections.
Posted by: Accounts are only part of the picture, 23 Sep 2008 | 00:00