absolutideas

And here is the reeipt for great bank results.

The issue at hand is the “Fair Value Option”, which under US GAAP essentially allows the booking of a pre-tax profit when a bank’s debt trades lower in the open market. This benefits banks that opt-in for FVO instead of other accounting approaches such as amortized cost, or historic cost.

And so readers can get a perspective of just how large an accounting “benefit” the FV Option is to financials, observe the table below which compares 2008 bank Net Income with the Pre-Tax Gain from Fair-Valuing of Own Debt.

source: Zero Hedge

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