Comments on: FAS 159 - The latest Sword of Damocles http://www.saai.com/index.php/fas-159-the-latest-sword-of-damocles/ Fri, 30 Jul 2010 17:51:12 +0000 http://wordpress.org/?v=2.6.1 By: Robert Ansehl http://www.saai.com/index.php/fas-159-the-latest-sword-of-damocles/#comment-19 Robert Ansehl Mon, 04 Jun 2007 13:47:04 +0000 http://www.saai.com/index.php/fas-159-the-latest-sword-of-damocles/#comment-19 The envelope please: And the answer to the age-old question of who would adopt this method of accounting is, "When there are value/ market pockets that are ascending quickly and there is an upside to adopt a new Wall Street asset strategy." The envelope please:

And the answer to the age-old question of who would adopt this method of accounting is, “When there are value/ market pockets that are ascending quickly and there is an upside to adopt a new Wall Street asset strategy.”

]]> By: david Osborne http://www.saai.com/index.php/fas-159-the-latest-sword-of-damocles/#comment-1 david Osborne Sat, 07 Apr 2007 11:38:24 +0000 http://www.saai.com/index.php/fas-159-the-latest-sword-of-damocles/#comment-1 From the other side of the Atlantic there is some mystification as to why our American cousins would want to persist with an arcane method of accounting, whose sole purpose seems to be to make investment income figures in the P&L look less volatile than they really are. The burden that this imposes in terms of accounting (and audit) costs, and in terms of accepting a less than optimal investment policy, seems very high. Your competitors are probably quite happy for you to carry on investing with one hand tied behind your back, because it makes you easier to compete with, but you must surely ask whether this attempt to smooth earnings is worth the cost. This is particularly so when you look at where earnings volatility really comes from. It comes from underwriting results. If you really want to smooth earnings then surely you'd be much better off looking at the underwriting side of the P&L account. David From the other side of the Atlantic there is some mystification as to why our American cousins would want to persist with an arcane method of accounting, whose sole purpose seems to be to make investment income figures in the P&L look less volatile than they really are. The burden that this imposes in terms of accounting (and audit) costs, and in terms of accepting a less than optimal investment policy, seems very high.

Your competitors are probably quite happy for you to carry on investing with one hand tied behind your back, because it makes you easier to compete with, but you must surely ask whether this attempt to smooth earnings is worth the cost.

This is particularly so when you look at where earnings volatility really comes from. It comes from underwriting results. If you really want to smooth earnings then surely you’d be much better off looking at the underwriting side of the P&L account.

David

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