Strange things in the BofA and Citi earnings statements
Back in April, I wrote about the odd way in which investor concerns about potential defaults at Citigroup and Bank of America were boosting the banks' earnings. I quoted commenter sulliclm's explanation:
they have to mark their liabilities to fair value, and in the case of their own debt (or in this case liabilities on derivative positions), they have to consider their own default potential as a component of fair value. So the more likely it becomes that Citi will default on their debt/swaps, the less those instruments are worth to the investors that hold them. Therefore the accounting guidance says that Citi should reduce the value of the liabilities on their books, and they book this reduction as a gain through the income statement. As an auditor I find the guidance to be ridiculous, but its the rule so companies are following it ...
-
1
That's not accounting, that's economic voodoo concocted to play supposedly profitable balance sheet games with investors and tax collectors.
-
2
Justin, maybe it's me, but I'm afraid I don't understand the issue, still after reading your article twice. - Ilene at http://www.philstockworld.com
-
3
I think Citi is up to something. First why sell Philbro for 250 when it earned more than that since 95 year-over-year, and they're winding up their US major banking operations in "high icome area's." Word is they're loooking into 6 regions to focus on. I'm suspicious of what they're up to. I have this feeling after they if the do the 30.1 reverse stock split the company maybe be absorbed. They're IMO making it easier to liqudate by wind up they target areas, and selling asset that preform at fire rate prices. If they do the 30.1 I'm jumping shit before 60 days.
- foxjust @MichaelWolffNYC Come on, it's the 'Burn Rate' of post-traumatic stress disorder thrillers! - 3 hours ago
- foxjust An acronym we can believe in RT @moorehn RT @shannybasar DOLTS, Dangerously Over-Leveraged Triple-A Superpowers http://bit.ly/bJq48M - 4 hours ago
- foxjust My first UK book interview (at Fool.co.uk). Complete with bestest, most gushingest intro ever http://bit.ly/aJaW2c - 5 hours ago
Most Popular »
- Undercover Boss Is Phony and Manipulative. But Don't Hold That Against It.
- NH Poll: Dems Face A Thumpin'
- Paul Ryan Won't Run For Prez In 2012
- Today's Health Care Checkup - GOP Plans Under the Spotlight
- Love At First Byte: Your Nerdy Valentine's Day Guide
- CO Gov Poll: Hickenlooper +4
- Driver's licenses for the Internet, Part 2
- OH Gov Poll: Kasich Maintains Lead
- In The Spotlight, Paul Ryan Faces A Purity Test
- Jack Murtha, 77, Dies
- Foreign Fish Species Threaten Great Lakes Ecosystem
- Al-Qaeda, Yemen, Wedding: Unlucky Name, Celebration
- Tea-Party Convention: Lessons on Palin and the Movement
- Venezuela: Chavez Protests at Ball Game Over Electricity
- Is the Bible Fact or Fiction? Archaeology's Discoveries
- Why China Needs The U.S. -- And Vice Versa
- Marja: Operation Moshtarak Tests Obama's Afghan War Plan
- 'Black Hearts': On Green, Iraq's 'Triangle of Death'
- Spain's Troubled Economy: Fears Over Euro Zone Outlook
- Who Were The First Americans?
Quotes of the Day »
RSS