Banks have to record the change in fair value of their own debt in income, under the fair value option. Why is this a “headache”? Does it matter if the change is recorded in income or other comprehensive income? Why or why not?
Firms can choose to mark to market their own debt. However, the resulting gains and losses were counterintuitive. Does the new rule that re-labels gains and losses as “other comprehensive income” help users? If so, how? If not, why not?
Blackberry (Research in Motion) has lost almost $33 billion in market capitalization in just over one year. What are some of the ramifications of a decline of this magnitude? What are some of its causes? What would you do if you were CEO?
What is the connection between the bankers’ bonuses and estimates of fair values of certain investments?
In assessing Citi’s results, would you include or exclude the reserves release and the debt valuation adjustment? Why or why not?
Was fair value accounting not intended to increase transparency? Does the degree of transparency depend on what is being “fair valued,” namely assets vs. a firm’s own debt?
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?
