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Accounting Standards Board Considering a New Category for Financial Assets – Held to Bankruptcy?
Meanwhile, in an alternative reality.........Reports that the EU has been lobbying the IASB to introduce a new category for financial assets remain unconfirmed. In the run up to the Stress Tests on European banks, it was alleged that top EU economists and accountants were pushing for an addition to the existing categories of financial assets (Held-for-Trading and Held-to-Maturity). The EU has strenuously denied that it attempted to introduce a new category called ‘Held-to-Bankruptcy’. Although it did say that, if there was such a category, sovereign debt issues would have to undergo stringent tests before qualifying as Held-to-Bankruptcy. As one would expect, banks’ exposures to, and losses on, Held-to-Bankruptcy assets need not be reported. In lieu of the Held-to-Bankruptcy category failing to get the thumbs up, the EU simply decided that the Stress Tests would look only at the bank’s trading book and not at the held-to-maturity book. In other words, the stress tests ignored most sovereign debt held by the banks. Seriously! Only that last bit is true, by the way. It is worth remembering the words of Marx (Groucho): The key to success in business is to develop a reputation for honesty and integrity. Once you learn to fake that you got it made.
LINK: http://blogs.reuters.com/globalinvesting/2010/07/23/eu-bank-stress-test-report/
