Could Better Accounting Have Prevented the Current Liquidity Crisis?
The article discusses problems in the U.S. caused by subprime lending and explores whether better accounting rules could have prevented them. Substantial numbers of mortgage loans were made to people unable to afford them, and then securitized as collateralized debt obligations (CDOs). When borrowers defaulted on payments, the CDOs plunged in value. Prevailing accounting rules exist that specify when “impaired” assets should be marked down. However, the author concludes, no rules can compensate for shady ethics or poor business practices.
Related Questions
- Should candidates try to show an awareness of the current economic slowdown, the liquidity crisis and the credit crunch or is this more suitable for paper P4?
- Should students try to show an awareness of the current economic slowdown, the liquidity crisis and the credit crunch or is this more suitable for paper P4?
- What Impact Did Fair Value Accounting Have During the Crisis?
