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Sunday, September 23, 2007

And They Say Accounting Doesn't Make Sense

As a person who's trained primarily in finance, accounting rules sometimes look like they were designed by Monty Python. Here's the latest installment - your company's credit rating drops, so the market value of your liabilities fall. As a result, you show a profit. This is what happened to some Wall Street firms recently. Read the whole story here. IMO, the best line in the article is:
But Moody’s Investors Service said buyers should beware of gains booked when brokers mark down their own debt liabilities. “Moody’s does not consider such gains to be high-quality, core earnings,” it said in a report issued Friday.
Ya think?

This is why we make all our Finance students take four accounting classes before they graduate. That way, they'll see these things often enough that they won't break out laughing.

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