Do you agree with the FASB’s reasoning to drop separate lender accounting for troubled debt restructurings?
Are you surprised at the amount of loan loss provisions at GS, JPM, C? What does it signal about the economic outlook in general and about the firm specific outlook? Can you do the journal entries? Are they cash or non-cash? What is the cash flow effect?
The wave of loans has not gone bad yet, but banks have recognized the losses now. What/where exactly is it in the accounting standards that requires the forward, anticipated, losses be recognized now?
Why do you think increased competition for the rating agencies does not seem to have worked to control what some consider to be inflated ratings for structured securities?
Tesla seems to be renegotiating with vendors after sales have been booked. What are the accounting implications from Tesla’s perspective? From the vendor’s perspective? What ratios are affected by longer payment terms and by rebates? What other sources of capital are available for Tesla at this point?
Do you think it is reasonable to require such “crystal-ball” foresight re: loan losses? Why was there such a push to require early recognition? Will it help? Whom? How?
If you were CEO of a small, community bank, what would you tell Russ Golden and Tom Curry re: the proposed accounting standard that would require you to book expected loan losses over the life of a loan on the day you make the loan? Why is this accounting standard being proposed?
Why do you think the IASB and FASB changed their accounting for estimating loan loss reserves (aka, allowance for bad debt)? If smaller banks are unprepared to make the changes, who do you think should shoulder the blame?
Are the banks doing anything “wrong” by releasing loan loss reserves? How would you be able to determine if it was wrong? Who might be hurt by such behavior if it is wrong?
U.S. banks don’t like the proposed accounting standard that would require provisioning for loan losses at the loan origination date, with an horizon for estimating bad loans that conceivably extends to maturity of the loan. If you were a bank CEO, what are your thoughts? How far into the future should you reasonably be expected to “see”.
Do you agree that the “expected loss” model is better than the “incurred loss” model? Why or why not? Can using an expected loss model become a self-fulfilling prophecy and exacerbate pro-cyclicality, which many claim worsened the financial crisis?
Do you think the contemplated “expected loss” model in accounting for loan impairment is “better” than the current “incurred loss” model? If so, how? For whom?
How do you think releases of loan loss reserves would affect banks’ stock prices? That is, do you think investors consider these releases to increase the value of the firm? Why or why not? If so, how?
How did it “appear” that Spain’s banks weathered the financial crisis of 2008 and 2009 (at least better than most) but are faltering now and in need of a bailout? Does the accounting treatment used in Spain bolster (or undermine) the case for IFRS being adopted in the U.S.? Or, is there no relationship between this accounting treatment and whether IFRS should be adopted in the U.S.?
Why do the French and U.K. banks differ in their impairments of Greek debt? What are the implications of this difference in opinion and methodology?
What does this mean: “lower credit losses could mean the release of . . . past reserves that will be counted toward current profits”?
