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Article: Lenient regulators helped dig S&L hole. (savings and loan crisis magnified through use of outmoded accounting practices based on historical cost accounting instead of more accurate mark to market accounting)
- Article from:
- Accounting Today
- Article date:
- November 23, 1992
- Author:
CopyrightCOPYRIGHT 1992 SourceMedia, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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A critical reason why mark to market accounting is an improvement over historical cost accounting is regulatory forbearance. In the savings and loan disaster, regulators operating under historical cost methods were able under the rules to allow S&Ls to stay open and to keep making risky investments with taxpayers, money.
Under a recent Financial Accounting Standards Board standard, Statement 107, all entities will have to disclose the market value and their marketable securities portfolios, both debt and equities.
Many assert that with those disclosures the cognizant regulator has all the information necessary to make regulatory decisions.
True. ...
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Dictionary definition: historical-cost accounting
A Dictionary of Business and Management;
425 words
...historical-cost accounting A system of accounting ... that assets should be valued at historical cost . It is relaxed to some extent ... fixed assets . The advantages of historical-cost accounting are that it is relatively ...
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