Actually, the headline to this blog is not entirely true. The FSA didn’t say that. But I did want to raise an issue about the report from Adair Turner, chairman of the FSA and evangelist for sorting out the regulation of banks, published yesterday.
It’s this: Turner says one way to improve regulation is for banks to set aside an Economic Cycle Reserve so that they have capital in case things go bad like they did so spectacularly not so long ago.
Turner suggests such a reserve would have to go on the balance sheet, but then hints it should also appear on the P&L (this one is up for debate, it didn’t seem like a prescription as I read the report). This way profits, and earnings per share, can be calculated after the reserve has been accounted for, thus producing a much more realistic, perhaps less ‘irrational’ number for bonuses to be calculated with.
Trouble is this – if you have to make a reserve based on where you are in the economic cycle, how do you work out where you are in said economic cycle and how much to reserve?
And, if you are never really sure about the position, or, therefore, whether you’ve made the correct reserve, how would you know if there accounts are right?
This one, it seems to me, will run and run.
Accountancy Age Jobs is delighted to announce the launch of a brand new look website for finance and accountancy professionals
The UK gender pay gap will not close until 2069 unless action is taken to tackle it now, according to new research by Deloitte
Three former Tesco executives, including the former finance director of Tesco UK, have been charged with fraud by the Serious Fraud Office in relation to a £263m accounting scandal at the retailer.
Deloitte chief executive David Sproul is among 11 chief executives to take part in global executive search firm Odgers Berndtson’s CEO for a Day scheme