Moulton slams 'absurd' accounting for banks' crisis
Private equity firebrand says 'absurd' accounting rules must be partly to blame for the current market troubles
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.