JDH:
Besides mixed metaphors being spewed out in the media, there are currently mixed thoughts (m.t.) put forward by the American government. The mixed thoughts make me think about George Orwell’s novel,
Nineteen Eighty Four.
His novel deals with a totalitarian government which attempts to control not only the speech and actions, but also the thoughts of its subjects. George Orwell created the word,
doublethink. According to his novel,
doublethink is:
The power of holding two contradictory beliefs in one's mind simultaneously, and accepting both of them....To tell deliberate lies while genuinely believing in them, to forget any fact that has become inconvenient, and then, when it becomes necessary again, to draw it back from oblivion for just so long as it is needed, to deny the existence of objective reality and all the while to take account of the reality which one denies — all this is indispensably necessary. Even in using the word doublethink it is necessary to exercise doublethink. For by using the word one admits that one is tampering with reality; by a fresh act of doublethink one erases this knowledge; and so on indefinitely, with the lie always one leap ahead of the truth.
The traditional
Mark-to-Market accounting principles insist that assets be held on financial books at the most recently traded market price. Bizarrely enough, these rules have actually been blamed as a factor in causing the financial global crisis.
So, what is the U.S. government going to do about it?
The U.S. government, via the Securities and Exchange Commission decided to permit their financial institutions to use Financial Accounting Standards Board (FSAB)’s recently tweaked
Mark-to-Market accounting rules. American financial institutions can now apply their own quesstimates to illiquid assets in distressed markets. Such assets are now commonly called
toxic assets (m.t.). Tangible billions (or is it trillions?) of the
toxic assets can be erased, deleted, unrecorded, gone ... you see them and don’t see them. For the U.S. government and company, they expect the rest of the world to think the same way.
Consequently, the more clear minded accounting critics have given their own truthful names such as
Mark-to-Fantasy or
Mark-to-Make Believe or
Mark-to-Myth to the FSAB’s new and improved accounting rules.
I am not an accountant, but I assume that the International Financial Reporting Standards (IFRS) accounting system means that financial institutions are required to follow traditional
Mark-to-Market accounting principles. That they must record illiquid assets at lower values, because there are no markets for them. If this is true, then Canada has made the correct pro-active move to follow IFRS’s accounting rules, and have not brought into the U.S. government’s doublethink. Canada’s financial institutions would remain more credible to investors from around the world.
So, does IFRS follow the traditional concept of
Mark-to-Market accounting?
Who says accounting work is dull.
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