BusinessCompany NewsUS think-tank criticises ‘absurd’ fair value

US think-tank criticises 'absurd' fair value

American Enterprise Institute says fair value accounting has reached 'absurdity'

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.’

Further reading:

Bankers sweat over sub-prime
accounting

US bank takes $700m credit crunch write
down

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