Two recent Financial Times articles highlight the accounting “dangers” still lurking around the world. The most recent refers to the the difficulties of getting the FASB and the IASB together to unite the standards, and the Saturday story refers to Private Equity valuations – the case of two PE firms valuing the same asset at different prices and the leeway these companies have to value them.
Taken together, it’s a reminder that it’s difficult enough to “learn lessons” from crises, but it’s extremely hard to actually implement changes. We would even point out that when changes are implemented, it’s not always an improvement… This means that the door is still open for human behavior + twisted incentive systems that eventually use these loopholes to create havoc. Recognizing this and controlling oneself is the first step to trying to take advantage of this.
Tags: accounting, riskmanagement
