tag:blogger.com,1999:blog-2956830097495837473.post879688147814734462..comments2023-10-14T13:18:37.330+01:00Comments on angels in marble: The End of the World Newshatfield girlhttp://www.blogger.com/profile/12673905475452420002noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-2956830097495837473.post-70631721591500740872008-01-21T17:41:00.000+00:002008-01-21T17:41:00.000+00:00Yes, Mark-to-Market accounting can realistically r...Yes, Mark-to-Market accounting can realistically register new value when it occurs rather than when it materialises as a cash flow. But MtM also enables companies to pretend that they have created new value which they know is never, never going to materialise. When this occurs, it is a fraud, which is harder to construe with accrual accounting.<BR/><BR/>This is what Enron did - apart from lots of other fraudolent sleights of hand – using MtM with SEC blessing, for instance writing into their balance sheet the present value of alleged future profits from their large-scale electricity generation plant in India, which was then and remains now unfinished for ever. <BR/><BR/>Yes, HG, Competence, Prudence and Honesty - unfortunately these are in short supply in corporate governance. <BR/><BR/>The redeeming thought is that, if financial markets are efficient, and corporate disclosures full transparent and trustworthy, the market will correctly reflect the true value of a company's assets - regardless of the accounting method actually employed.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2956830097495837473.post-5440463749508563322008-01-21T14:43:00.000+00:002008-01-21T14:43:00.000+00:00Yes ND, mark to market accounting used and accompa...Yes ND, mark to market accounting used and accompanied by prudence, competence and honesty ... oh.hatfield girlhttps://www.blogger.com/profile/12673905475452420002noreply@blogger.comtag:blogger.com,1999:blog-2956830097495837473.post-16037545485693203072008-01-21T06:39:00.000+00:002008-01-21T06:39:00.000+00:00This is where mark-to-market accounting comes in (...This is where mark-to-market accounting comes in (if not specifically, then conceptually)<BR/><BR/>it forces (well, <I>encourages</I>) any notional change in value due to changes in markets to be recognised actively in the P&L, and squares the conceptual circle<BR/><BR/>part of the beauty of it, is its symmetry: it includes gains and losses equally, on a systematic and constantly-updated basis <BR/><BR/>accrual accounting is horribly clunky, and (because asymmetrical) flouted at valuation-time, as companies (and Prime Ministers) turn their blind eye to the effective losses they are carrying, right up until the very last moment, and then some<BR/><BR/>the Enron thing has caused some foolish reactions to MtM from financial and accountancy regulators, as well as from commentators<BR/><BR/>(BTW, it was also Keynes who said - from memory, at this time of the morning - <BR/><BR/>"about future prices we know nothing"<BR/><BR/>to be distinguished carefully from <I>futures</I> prices)<BR/><BR/>coffee, I need coffeeNick Drewhttps://www.blogger.com/profile/13670594203660051701noreply@blogger.comtag:blogger.com,1999:blog-2956830097495837473.post-20553351027855445042008-01-20T22:42:00.000+00:002008-01-20T22:42:00.000+00:00That's confusing real and nominal values. A given ...That's confusing real and nominal values. <BR/><BR/>A given amount of money buys more physical assets but the earning power of those physical assets is irridemably reduced by pessimistic expectations.hatfield girlhttps://www.blogger.com/profile/12673905475452420002noreply@blogger.comtag:blogger.com,1999:blog-2956830097495837473.post-26952684347854505492008-01-20T20:48:00.000+00:002008-01-20T20:48:00.000+00:00"'Where does it go?'"The value goes to the remaini..."<I>'Where does it go?'</I>"<BR/><BR/>The value goes to the remaining money; as supply decreases (ie billions disappearing) the remaining becomes more value (ie cash becomes King). The cash in your pocket is worth more - that's where it goes.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2956830097495837473.post-42293995748523503142008-01-20T20:02:00.000+00:002008-01-20T20:02:00.000+00:00This could be the case S, with asset holders losin...This could be the case S, with asset holders losing wealth to employees/workers/the government. <BR/><BR/>But it could be a case also of pessimistic expectations being self-fulfilling and making everyone worse off.<BR/><BR/>Sometimes 'Thinking makes it so'.<BR/><BR/>(Keynes wrote in the preface to a late version of the General Theory that were he to rewrite then he would distinguish between correct and false expectations but, either way, they would still be crucial).hatfield girlhttps://www.blogger.com/profile/12673905475452420002noreply@blogger.comtag:blogger.com,1999:blog-2956830097495837473.post-74458232136313512002008-01-20T19:30:00.000+00:002008-01-20T19:30:00.000+00:00Presumably what it all means is that one party's s...Presumably what it all means is that one party's share of the world has increased, and another's has decreased. The rest is a kind of legerdemain, smoke and mirrors, which is why finance will and must remain complex - otherwise we'd see the deception.Sackersonhttps://www.blogger.com/profile/09410040031410954403noreply@blogger.com